Important Factors when Applying for a Mortgage
Everyone has hopes to own a home. Sadly, not everyone can afford to pay in cash for a new house. In fact, a majority of the people rely on mortgages to help them make their dreams of owning a house come true. It’s not an easy and instant process but it helps to be prepared once you decide to apply for a mortgage.
First you have to check your credit. A good credit standing gives you a big chance to have your loan approved. Check your credit score early on so you’ll still have enough time to correct any errors or improve it.
Approximately 35% of your credit score is assigned to your bill payment history. Mortgage companies would like to make sure that you will pay your mortgage payments in a timely manner. They would want to check up to 7 years of your billing payments history. If you already have late bill payments in the past, then make sure that you pay all your bills on time in the future.
The next important factor to your credit score is your credit card. Approximately 30% of your credit is accounted to your credit card usage. Do not use your credit card excessively in the months before your application. Also, do not follow the myth that if you cancel your credit cards, it will increase your chance of having your loan approved. That’s not true; in fact it will lower your available credit. Lastly, do not apply for a new credit card between now and the time that you apply for a mortgage.
Keep your credit card balances between 30 to 50 percent of the card credit limit. If you exceeded this limit, at least try to settle the balance down to 50 or it would be much better if it is down to 30.
Save money for your down payment and closing costs. You still don’t have the exact amount, but have a ball point figure of how much you will have in savings prior to closing. Most lenders require at least a 3.5% to 20% down payment. Keep in mind that the bigger your down payment, the less you’ll owe on the home and the smaller your monthly mortgage payment will be.
Set a price on how much you can afford. This will help you save time. You should have an idea on how much are you willing to pay for your house before you start searching for your dream house. Your lender can help you determine what price point you should target in your home search.
Employment stability is a big factor, as the lender will view your mortgage application more favorable if you’ve held your job for a long time. If you’re an entrepreneur, mortgage companies would like to see at least 2 years of business or self-employment income before approving your application.
There are 2 broad categories of mortgage, fixed rate mortgages and adjustable-rate mortgages; you may research on it before you apply for one. Be honest and ask about the things that you don’t know and decide which one is the best for you.
Start comparing lenders, they are not all alike. They have different specialization in working with borrowers with different income levels. Find a lender that can offer you the perfect mortgage for your situation.
Finally, start preparing your documents as early as now if you will be applying for a mortgage. The mortgage company will require numerous documents from you, such as recent tax documents, bank statements and more. Collecting these now can help you save time and energy for later use on important things.
It’s best to be organized before applying for a mortgage. When you are ready, there will be lesser disturbance and strain and the process will be as smooth flowing as possible.