KEY THINGS BEFORE YOU APPLY FOR A MORTGAGE
1. Check your credit report. Order a free credit report via www.annualcreditreport.com and clean up any outstanding debts, collections etc and eliminate any surprises before applying for a mortgage.
2. Maximize your credit score. While job stability, income, existing debt, etc. all affect your ability to qualify for a mortgage, your FICO score has the biggest impact on your spending power. Your creditworthiness can affect your interest rate and your mortgage insurance. In most cases, the higher the credit, the better the rates. The perfect credit mix consists of two installment loans and three revolving accounts (credit cards, credit lines) with balances of less than 30% of the high credit line. If you are withdrawing accounts, please do not close them. Over 50% of your credit history is based on payment history and length of payment history, but only on open accounts.
3. Gather documents. This is a perfect time to collect all of the items your lender will need for your loan application. Certain loan products may not require all of these documents, so it is good to meet with your lender. The most common documents required when applying for a loan include:
– Pay slips for the last 30 days (consecutive)
– W-2 for the past 2 years
– Tax returns – the past 2 years with all pages (federal returns only), this is required if you are self-employed and need both personal and business returns (if applicable).
– Bank statement – the last 2 months or where do the funds for your deposit and closing costs come from?
– Divorce decree and child benefit documents (if applicable)
4. Fund for closure. There are many cheap payment options. It is important for potential home buyers to understand that they likely won’t require a 20% down payment, but they will need to do their homework to understand the options available. Programs exist that allow qualified buyers to buy a home with as little as 3.5% down payment. There are even options like VA loans and USDA loans with no down payment requirements for qualified applicants.
5. Get approval beforehand. Stand out as a serious buyer and understand what you can afford.
6. Find a real estate agent. Contact a local professional who will guide you through the process.
WHAT TO AVOID AFTER APPLYING FOR A MORTGAGE
Consistency is the be all and end all after applying for a mortgage. Discuss any changes in income, assets, or credit history with your lender so that you do not jeopardize your application.
1. Do not change any bank accounts.
2. Do not apply for a new loan or close any loan accounts.
3. Don’t make big purchases.
4. Do not deposit any cash into your bank accounts until you have spoken to your bank or lender.
5. Do not sign any other loans for anyone. Always fully state your intentions and discuss them with your lender before doing anything financial. As always, I am available to answer any questions you may have about applying for your first mortgage.
Branch Manager, NmLS # 1721861
Cherry Creek Mortgage, LLC, NmLS 3001