If you want to purchase a home, you are going to need to secure a mortgage. To secure a mortgage, there are steps you can take before you even apply for the pre-approval process to set you up for success.
1. Save Up for a Big Down Payment
You are going to want to save up for a sizeable down payment. There are indeed lots of programs that allow you to place a smaller down payment. However, by placing a larger down payment, you will have more equity in the home to start with. You will be able to borrow less money and enjoy a lower monthly payment when you put down a larger down payment. A lender may also look at your application more favorably and give you better terms when you have a big down payment.
2. Pay Off Debt
When you apply for a mortgage, the lender will look at your debt to credit ratio, which is how much available credit you have versus how much debt you have. For example, if across all of your credit cards, you have a credit limit of $20,000 and you are carrying $10,000 in debt, you have a debt to credit ratio of 50%.
You will want to get that ratio down to as low a percentage as possible, as it shows you are not carrying too much debt and that you are responsible with your money. In addition, paying down debt can make you more attractive to lend money to.
3. Know What Type of Financing You Want
Before you start applying for mortgages, you want to know what type of mortgage you are looking for. For example, do you want to apply for a 15-year mortgage or a 30-year mortgage? Do you want an adjustable-rate or a fixed-rate mortgage? Knowing what type of mortgage you want will help you choose the right lender and will give you more agency when talking with an agent.
4. Be Strategic With Applying for a Mortgage
When it comes to applying for a mortgage, you will want to be strategic about applying for a mortgage. When you apply for a mortgage, you will want to choose several mortgage companies and place applications with them during a set two-week period.
If you put in multiple applications over a short period, it will only end up counting as one hard inquiry on your application, not multiple inquiries. On the other hand, if you spread out the applications, your credit score will take multiple hits, which you want to avoid.
If you want to get approved for a mortgage, save up for a big down payment, pay down debt, know what type of financing you want, and put in multiple applications all at once to lessen the hit to your credit score.
Share25 May 2021
When it comes to borrowing cash for a new house or a nice car, how much money do you really need? Although you might be tempted to mortgage yourself to the brim or borrow a little more than you should, the fact of the matter is that everyone has financial limits. My blog discusses the impact of borrowing more than you need, so that you can make smarter decisions with your money. In addition to keeping you out of trouble, this valuable information might also improve your quality of life and protect your financial future. You never know, it could make all the difference.
