Buying a house is no everyday occurrence. To succeed in this endeavor, it’s important to be aware of current market trends, potential deals and the probable future value of the property you are interested in buying.
Of course, the first step to any successful home purchase is simply understanding the process of securing a mortgage loan. Following are the most important things to do before applying for a home loan.
Stack All Documents You Need
- Tax returns
- Pay stubs, W-2s or other proof of income
- Bank statements and additional assets
- Credit history
- Photo ID
- Property rental history
Understand Your Market
The market you are eyeing for your future home will have a key impact on your mortgage application. The type of home you want to purchase and the state you’re purchase in are both important considerations. For example, a more expensive home will require a bigger down payment if, in fact, a down payment is required (down payments aren’t required on USDA loans and VA loans). Similarly, if the market within a state is riskier to the lender because foreclosures are more common in that state, the mortgage rate is likely going to be higher than in a state with fewer foreclosures.
Work On Your Credit Score
It’s well known that a higher credit score improves your chances of securing a home loan—maybe with a lower interest rate. However, a less-than-ideal credit score is NOT a kiss of death to your home buying prospects. This is especially true since Fairway considers numerous other factors as well. It’s also important to understand that minimum credit score requirements vary depending on loan type. By taking simple steps to improve credit, you can quickly boost your score. As a result, you’ll be on your way to making the dream of homeownership a reality!
When you apply for a mortgage with Fairway, your loan officer will obtain and review your credit report. If your mortgage professional determines you can benefit from credit score improvement, we may refer you to work with Fairway’s internal Creditool team. If so, we’ll ask you to take part in our program. One of our highly skilled credit analysts will be assigned to review your credit report and draft a credit improvement action plan for you. There is no cost to you to do so. Learn more here.
Debt to Income Ratio
If you’re spending anywhere close to as much money as you’re making, you need to change that before applying for a home loan. The basic principle here is called debt-to-income ratio. DTI is a fancy way of describing the percentage of your monthly gross income that goes toward paying debts. You’ll get this percentage by taking the total of your monthly debt payments and dividing by your gross monthly income. DTI is one way mortgage lenders gauge your ability to make the monthly payment on a potential mortgage loan. So the lower your DTI, the better-positioned you will be for a mortgage loan. Click here for ways to lower your DTI and be on your way to becoming a new homeowner.
Start Saving for a Down Payment
There are many ways to do this. The easiest, perhaps, is to cut costs in your personal expenses wherever possible. So maybe instead of eating out five nights a week, try buying groceries and cooking cheap meals. You’ll be amazed how much you save after doing this for a short while. The other way to save for a down payment is to pad your income. This can always be accomplished by taking on a part-time, freelance or temporary job. If all else fails, see if someone you know needs their grass cut or their car washed. While these kind of side gigs might not buy a yacht, they’ll add up to something. That something will help you tremendously when it comes to making that down payment.
Avoid Big Purchases
Every mortgage company keeps an eye on your finances after you receive your home loan approval. It’s not a good idea to make any major purchases (car, boat, another house, etc.) or take out a loan before the home lender writes the check for your mortgage loan. Just take a deep breath. You will likely make plenty of other significant purchases in the future, but now is not the time.
Find The Right Lender
The right lender for you, of course, is Fairway Independent Mortgage of the Carolinas! Our experienced and highly devoted loan officers are ready to answer any questions you have. They’ll get you started down the path toward a wonderful home purchase. You can complete an online mortgage loan application in as few as 10 minutes. Then, securely upload loan documents and monitor your loan’s progress so you always know where things stand.
So, what are you waiting on? CONTACT US today.
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