Most people take out a mortgage when they are buying a new home. Down the road you can also purchase a second mortgage. Whatever your reasons may be for needing a mortgage, the following advice will improve your chances of getting a good rate and a quick approval.
Before applying for a mortgage, pay down your debts. Lenders use a debt to income ratio to verify that you are able to afford a mortgage. A general rule of thumb is 36 percent of your gross income should be available to pay all of your monthly expenses, including your mortgage payment.
Avoid spending lots of money before closing on the mortgage. Too much spending may send up a red flag to your lender when they run a second credit check a day or two before your scheduled meeting. Save the spending for later, after the mortgage is finalized.
If you can afford a higher monthly payment on the house you want to buy, consider getting a shorter mortgage. Most mortgage loans are based on a 30-year term. A mortgage loan for 15 or 20 years may increase your monthly payment but you will save money in the long run.
Make sure that all of your loans and other payments are up to date before you apply for a mortgage. Every delinquency you have is going to impact your credit score, so it is best to pay things off and have a solid payment history before you contact any lenders.
Have the necessary documents ready. There are a few documents that you’ll be expected to have when you come in for a home mortgage. You’ll need to provide bank statements, income tax reports, W-2 statements, and at least two pay stubs. Having these at the ready will help make your meetings go much quicker.
Although using money given to you as a gift from relatives for your downpayment is legal, make sue to document that the money is a gift. The lending institution may require a written statement from the donor and documentation about when the deposit to your bank account was made. Have this documentation ready for your lender.
If you’ve gotten approved for a mortgage, don’t make any other big purchases until after you’ve closed on your home. Typically your lender will pull your credit once again right before closing. If there are issues that crop up it could lead to problems with your closing. Be smart and curb spending until all is complete.
Before you sign the dotted line on your refinanced mortgage, be sure to get full disclosure of all costs involved in writing. This will itemize the closing costs as well as whatever fees you are responsible for. Most companies are honest about these fees, but some keep it hidden to surprise you later.
Think outside of banks when looking for a mortgage loan. Family could be a cheap source of a loan, for example. Credit unions are known for having great rates, and you should see if they will give you a loan as well. Make sure you carefully consider every option available to you.
When trying to figure out how much of a mortgage payment you can afford every month, do not neglect to factor in all the other costs of owning a home. There will be homeowner’s insurance to consider, as well as neighborhood association fees. If you have previously rented, you might also be new to covering landscaping and yard care, as well as maintenance costs.
You only need to know the basics to get a good home loan. Now that you read this article you should have the necessary tools required to make a well informed decision. This helps to ensure you get a good rate.