If you’re applying for a mortgage, consider these tips.
Buying a home can be an exciting experience, but it can also be stressful. Being well prepared for the homebuying journey can help you feel more at ease as you get started. So get ahead of the game.
Our Valley mortgage team put together these simple tips to follow so you can feel more prepared when applying for a mortgage.
Check your credit score.
One of the key factors in determining if you’ll be approved for a mortgage is your credit score. Knowing your credit score and reviewing your credit report can help you spot any potential problems. Be sure to look for mistakes and dispute any issues you discover. Having strong credit will not only make it easier for your application to be approved, it can potentially decrease your interest rate.
Gather the required documents.
When applying for a mortgage, you’ll need to submit a lot of documents. Your bank or lender will ask for items like two months of pay stubs, two years of tax returns, three months of bank account statements, and so on. Having these documents ready and available will help speed things up.
Determine how much you can afford.
Banks often look at debt-to-income ratios to determine how much you can afford. The debt-to-income ratio is the percentage of your gross monthly income that will be used to pay your monthly mortgage. Your monthly mortgage payment should not exceed 43% of your gross monthly income. In fact, the ideal debt-to-income ratio is at or below 36%.
Pay off outstanding debt.
One of the easiest ways to improve your credit score and increase the mortgage amount you qualify for is to pay off outstanding debt. If you can’t afford to pay off your debts, consider consolidating them into a single low interest loan to reduce your monthly payment. Eliminating or reducing your debt will improve your debt-to-income ratio and help you qualify for more mortgage options.
Learn about the different financing options.
There are fixed and adjustable-rate mortgages as well as programs tailored to unique situations, such as veterans, healthcare professionals and first-time homebuyers. Talk to one of our home loan consultant about benefits and eligibility requirements of different programs to find the one that’s right for you.
Save for your down payment.
The down payment is the amount you pay up front when buying a home. The bank traditionally sees this as your investment in the home and the bank’s security if anything were to happen. Your down payment amount can influence the interest rate you’re offered and if your lender will require you to pay for private mortgage insurance (PMI). Be sure to ask about low down payment options that might be available to you.