Easy Steps to Apply for a Mortgage

Easy Steps to Apply for a Mortgage

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If you’re a first time home buyer who’s looking to get a mortgage, it’s easy to get lost in all the real estate jargon and end up lost and confused.  If you’re asking yourself, “what do I need to apply for a mortgage?” you’re going to need to know a couple of things– but don’t worry, we’ve got them listed all right here for you!  After you read this list, start compiling the things you need, bring them with you to talk to your lender– they’ll be impressed that you’re so prepared.

Find a lender you can trust

Your lender could be a bank, an investor or a mortgage company but before you borrow hundreds of thousands of dollars from them, it’s smart to get to know them a little bit.  Shop around for a lender who will do a good job for you.  How strict are their policies?  How many borrowers do they turn away?  What are their interest rates like?  Ask people you trust for referrals of a great lender.  

Get pre-approved

Getting pre-approved shows that you’re serious about buying.  All you have to do is submit financial and personal information to your lender and you’ll receive a letter stating how much you are pre-qualified for in a home.  It’s important to know how much you want to spend on a house and also how much you can afford.  Some lenders will approve you for much, much more than you would want to spend on a home.  Do your research and be financially smart. Happy house hunting!

Credit reports

When you’re ready to apply for a mortgage loan, you should know your credit score and also make sure information listed on credit reports is accurate.  Credit reporting companies sometimes make mistakes or miss things–like when you paid off your car or your student loan debt.  Make sure to have any discrepancies handled before going in to apply for a mortgage.

Credit accounts

The amount of credit available to you (like a credit card or line of credit through your bank) should be disclosed to the lender.  But, don’t close out or open any new accounts right before applying for a loan–it looks a little suspect.  Also, take care of your credit by being responsible.  That means making payments on time and paying off any debts you can.  Doing those things now will help you look better to the lender when you try to get approved for a loan.

Down payment amount

You should have money saved for a down payment– the more you can pay up front, the more likely it will be that you get approved for a mortgage. This is especially important if your credit score isn’t all that great– having a large chunk of money that you can put down right away will make a lender feel more comfortable in approving you for a mortgage loan. You should try to have at least 3.5% of the home price you want to pay saved for a down payment.  If you can put down 20%, you’ll lower your monthly payments and you won’t have to pay for PMI, or private mortgage insurance, each month.

Steady income

If you can help it, don’t change jobs or quit your job while trying to apply for a mortgage.  Lenders want to know that you have income coming in regularly and that you’ll be able to make monthly payments.  Plus, if anything changes from what you put down on the mortgage application, (where you are working, how much you are making) it can stop or delay the application process.  You might not be able to qualify for the same amount anymore, so make sure your employment feels secure before applying.

Extra funds

Potential borrowers should have more than just the down payment set aside when buying a home.  They must also remember closing costs which are typically about 3% to 5% of the home price and other fees like home inspections, home appraisals, application fees, and title searches.  You should also avoid making large purchases (like a car, expensive furniture etc) before getting approved for a loan.  Don’t deplete your nest egg right before you need it most!

What’s your debt-to-income ratio?

Lenders don’t want your debt to exceed what you can comfortably pay from your gross income– so if you have a lot of credit card debt or an expensive car payment, that’s eating in to the amount you could qualify for in a home. A lender doesn’t want to approve you for a mortgage on a home you can’t afford.  So, if you can’t make the monthly payments, say, on a home that costs $300,000, you won’t be qualified to spend that much on a house.

Ask about interest rates

An interest rate doesn’t change whether you get approved for a loan or not, but it will affect your monthly payment.  If your lender is processing your loan and knows that interest rates might go up, you can ask for your current rate to be ‘locked in,’ so the rate doesn’t change for you.

Applying for a mortgage loan can seem like a tricky process, but it’s not as hard as it looks.  Your lender will be there to help you every step of the way, and by following the tips listed here, the loan application process will run more smoothly.  If you need real estate help in New York City in order to buy or sell properties, please contact me! I would be more than happy to help you out. 

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