Before you apply for a mortgage loan, there are some things you need to know. Whether you are buying a house for the first time or it has just been a while, WEOKIE is ready to help you walk through the process and make sure you are ready for what comes next.
1. Your credit score matters. A lot.
You need to be familiar with your credit score and the best strategies to improve it. Many banks and credit unions provide easy access to your credit score so that you can plan ahead for your mortgage application. If you know where your credit score problems lie, you can figure out ways to improve it before you are impacted negatively during the mortgage application process.
A better credit score means more underwriters are willing to make you an offer, and the rates end up being much better. You will save a lot of money over the life of your mortgage if you can get a lower rate because of good credit.
2. Paying down debt will make you more likely to get approved.
One of the key factors of your credit score is the amount of debt you carry, especially as it relates to your income. A high debt-to-income ratio can make it difficult for you to get the best loan possible, whether it’s for a car, a home, or another major purchase.
If you can focus on paying down debt before you apply for a mortgage, you will increase your credit score by default, and also have a lower debt-to-income ratio, which makes you more appealing to lenders.
3. Keeping your paperwork in order will help with the application process.
There is a lot of documentation needed for a loan application. Keep your paperwork in order and know where you can easily access everything that you will need during the application process.
You should always have the following items readily accessible so that depending on what your lender asks for, you can provide it all:
- Bank statements going back 3 months
- Documents related to any current lease or loan you are responsible for
- 3 years of income tax returns
- 2-3 months of pay stubs from your job, or a W-2
- Letters from anyone (such as a family member) who is giving you money towards your home, stating that the money they are providing is NOT a loan
4. Be conservative in what you do with your money in the weeks and months before you apply.
This is what you don’t want to happen: you don’t want to appear to have irrational, unpredictable, or extravagant spending habits when applying for a mortgage. Underwriters want to see consistent income and a steady reduction in debt. They don’t want to see large purchases, other major financings, or unpredictable spending.
5. People plan to be in their homes for differing amounts of time. Figure out how many years you want to live in your next home.
When it is time to figure out the right kind of mortgage loan for you, one of the factors you should consider is how long you plan to live in your next home. Is this something you are doing to build some credit and equity, but you don’t plan on being in the house more than a few years? Or is this your dream home, the home you’re going to stay in for as long as you possibly can? Is this a home that you’re moving into with plans of leaving once you start or grow your family?
Not all mortgages are the same, and knowing how long you plan to stay in this house is important information to share with your lender or underwriter. That conversation will help you find the right loan for your needs.
What else do you need to know?
Before you finance a car or a home, there are things you can do today to prepare for your monthly payments. Our eGuide explains what you should be doing today to prepare for an auto or mortgage loan. Download the guide today to learn more or give us a call at (405) 235-3030 or 1(800) 678-5363 to discuss and strategize your financial goals today!