Today, the real estate market is competitive in several parts of the country, requiring home buyers to put in hostile offers, and in some cases, compete with wealthy investors paying cash. This means now you need to be qualified for a mortgage before you can start looking for real estate.
Some people don’t know the first thing about applying for a mortgage loan. If you know little to nothing about a mortgage loan, educating yourself and seeking advice from mortgage educators is essential. That said, here are a couple of ways to avoid disappointment and headache when applying for a mortgage loan.
Know your credit score
It only takes a few minutes to know your credit score, but surprisingly, some people never review their credit scores and history before submitting a home loan application, assuming that they have a score that is high enough to qualify for mortgages loan. A low credit score can stop dead your mortgage application in its track.
If your credit score falls below 680, you may not be able to apply for a conventional mortgage loan. In addition to having a high credit score, frequent lateness, several missed payments, and other derogatory credit details can halt your mortgage approvals. So, before you apply for a mortgage, clean your credit history.
What are your income and monthly debt obligations?
One of the first steps you must take when preparing to apply for a mortgage is to document your debt payments and monthly income. If you have a variable income, or self-employed, the underwriting process will be a bit more involved. Getting approved for the mortgage you require is about staying within a particular metrics the mortgage lenders use to establish how much you can afford for a mortgage payment. Huge debt payments will limit the size of the mortgage approval you can get. So, if possible, try to pay off the loans or avoid taking new ones.
What is your mortgage budget?
You will want to know how much house you can afford and pay comfortably before speaking with a lender. A general rule you can apply is that your total housing payment, including insurance, taxes, and fees, shouldn’t be more than 35% of your gross income. So, instead of buying a more expensive house, be smart, and decide on a home that fits comfortably within your budget.
Determine how much you can save for down payment
Figure out how much you can put down for a down payment. In today’s real estate market, expect your lender to require at least 10% down payment unless you are getting a special program loan. Commit to the maximum amount of cash you can afford before starting the mortgage approval process.
If you are ready to invest in property, Justin Purpero can tell you precisely the best mortgage for you, how much you can afford to borrow, and how much you could save right now if you have an existing mortgage. Justin Purpero is also one of the leading mortgage educators that can give you personalized, tailored advice to help improve your chances of being approved for a mortgage loan.