There are several steps you should take before you start your house search, in case you think you are ready to purchase a new home. It is important that you get your finances organized. Not only do you need to organize your finances so you can determine how much you can afford, you will also need to provide the mortgage lender with specific information that will be used to determine whether or not you qualify for a loan and what terms and rates you will receive.
Check into Your Credit
The initial step you should take toward organizing your finances is to take a look at your credit report. You are entitled to a free credit report once per year and you can get it by going to www.annualcreditreport.com. Since there are no strings attached, this is the best place to go for your free credit report.
Check out your free credit report after obtaining it in order to make sure all of the information in it is accurate.
If you find that anything is incorrect, get in touch with the credit reporting bureau and let them know about the error. After this, wait until the problems have been taken care of before you begin the process of applying for a mortgage loan.
Gather Your Paperwork
You need to start gathering paperwork to share with the mortgage lender only when you are sure that your credit report is looking as good as possible. The paperwork you should gather includes:
Income tax returns for the past three years Bank statements from the past three months Copies of your current pay stubs and records of any additional income you may have Receipt of credit issues that have been resolved Copies of bankruptcy or divorce settlements
These details will assist the mortgage lender to know more about your financial situation. If you do have some red marks on your credit history, be sure to bring in as many documentation as possible to show that you are on track and doing better as far as your finances are concerned.
Pay Your Debts and Save Up
If you are encumbered with a huge amount of debt, you should take steps to fix that issue prior to applying for a mortgage loan. If possible, even small debts should be paid off.
In addition, you should avoid acquiring new debt. The chances of being approved improves if you less debt when applying for a mortgage loan.
Your assets play a major role in determining whether or not you are approved for a loan.
Areas the mortgage lender will consider include:
Your savings account Any investments you have, including bonds, stocks, and mutual funds The cash value of your insurance policies Monetary gifts provided by family members Your monthly salary
You will receive better terms and a better interest rate if you take these steps prior to applying for a loan, even though it is possible to get a mortgage loan with a less-than-desirable credit history and with little money in savings.
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