Mortgage approval is a crucial step in the home buying process. But unfortunately, many people don’t know what to look for when deciding on a mortgage or how to prepare to get the best deal.
That’s why today I wanted to talk about 5 crucial things you must do before deciding or applying for a mortgage.
1. Get prequalified
Getting prequalified is a smart move. When you pursue a home loan prequalification, you get to know how much you can afford to pay for a house. This way, you have an idea about your budget and you can plan ahead.
Also, when you get prequalified, you can make an offer on your dream house immediately since you already know how much you can stretch your pocket.
2. Make sure all the paperwork is in order
Paperwork can be a hassle. But this is something we all need to do eventually. So, it’s better to have these in order, sooner than later.
The documents you are going to need are Social Security Card, bank documents, statements, work background, tax returns and employer info. It is also important not to change your bank while the mortgage approval process is in process.
In order to track your assets, your loan officer will use your bank documents. So, changing your bank will throw him off the trail, further complicating the process.
3. Your credit score is a key factor
As you may already know, your credit score affects the mortgage rate. The better credit score you have, the better mortgage rate you are likely to get.
You can get a credit report from authorized agencies for free. And once you get the report, take your time to clean it up and improve your credit score. Increasing income and lowering Debt-To-Income Ratio can help improve the score. As a general rule of thumb, always aim towards a score higher than 700.
4. Look up the lender
When you are choosing a lender, the thing you need to care about the most is their reputation. This is the only way you can be sure that you are not falling for predatory lending.
Do some basic research, ask around in the community, talk to your friends and family. Someone will definitely give you some lead or insight. Alternatively, you can look them up on Google. If you google the lender, you are bound to find some notes that’ll help you decide.
5. Slow down
Between submitting your papers and getting a good mortgage deal, there is a significant gap. It takes some time to get the documents to be processed, and if during this period, you make any substantial changes to your finances and to your life, you might face some complications. Things like moving from one house to another, switching careers, changing insurance companies and even closing a credit account can delay the whole mortgage approval. Also, these can affect the interest rate. So, while you are waiting for the mortgage approval, take things slow.
