Tip: Getting a mortgage can take anywhere from 20 to 40 days.
Congratulations! You’re in the stage in your life when you decide it’s time to buy a new home. We believe it’s how you live that matters, and we love welcoming new neighbors to our communities. Whether you’re a first-time homebuyer, or if this isn’t your first rodeo, it’s still important to prepare ahead of time before applying for a mortgage.
If you’re in the market for a new home, take these steps when preparing for a mortgage:
Review your credit report
Check your credit score well ahead of time so that you can estimate what kind or rates you qualify for and if you will get approved. Credit Karma notes, “While different lenders have their own standards for rating credit scores, 700 and higher (on a scale of 300 to 850) is considered good.”
Stop paying with credit
Avoid paying with credit or applying for new credit cards in the months leading up to requesting a mortgage. Opening new credit lines can temporarily lower your credit score. Carolyn Warren, author of Homebuyers Beware, explains, “The credit bureau doesn’t know how you’re going to handle that new credit, so because there’s that uncertainty, it’s a risk factor.”
Save, Save, Save
Save your money for the down payment, which will on average be between 3.5 and 20 percent of the purchase price. Now is not the time to go buy a brand new car or splurge on a shopping spree.
Familiarize Yourself with Mortgage Rates
There are fixed rates and adjustable rates. There are 15 year or 30 year fixed rates. It’s important to take the time to familiarize yourself with how mortgage rates work and which option is best for you. Take Advantage of Free Mortgage Websites, like LendingTree and Credit Karma, which help you compare mortgage rates from different banks.
Have All of Your Documents Together
Before you walk into the bank, make sure that you have all of the important documentation that a loan officer is going to ask for. This includes a credit report, W-2’s, pay stubs, your most recent Federal Tax return, and two months of bank and investment statements.
Now that you have everything you need to prepare for a mortgage, it’s time to apply! Stay tuned for Part II explaining all of the steps in the mortgage process once you’ve filed.