How To Find A Mortgage
Mortgage rates are expected to keep rising in 2017, but that shouldn’t discourage first-timers from making the leap into home ownership. These 5 tips on how to find a mortgage can help you navigate uncertain waters and land your first mortgage.
1. Check your credit score.
Your credit score is one of the first things your first mortgage lender will look at, so it’s essential to know where you stand.
Request a free credit report to find out your score. Different lenders will look for different scores, but anything above 760 will put you in a favorable position.
If your credit score is low, start building good habits now to bring it up. Be patient—this can be long process, but the benefits are far-reaching.
2. Lower your debt.
Mortgage lenders are looking for assurance that you’ll be able to make your monthly payments with no problems, so any outstanding debt may look like a negative.
Take stock of any looming credit card bills or student loans and start paying them down. Minimizing your debt will make you a better candidate for your first mortgage.
3. Shore up your savings.
Lenders will also take a look at your savings to see if you have enough stashed away to cover the costs associated with buying a home.
Don’t dread the down payment.
The traditional rule of thumb was to set aside 20% of a house’s cost as a down payment.
Times change, however, and now it’s possible to secure a loan with little to no down payment at all. If you’re a veteran or purchasing a home in a rural area, check federal guidelines to see if you qualify.
Save enough to close the deal.
Closing costs can tally up to 2 to 5% of the final price tag. Your lender may also ask for the first year’s worth of property taxes and homeowners insurance paid up front.
Don’t forget a rainy day fund.
Sometimes your employment status changes, major appliances break or another expensive emergency pops up. Your lender will want to know that you have enough set aside to deal with surprises.
4. Collect your paperwork.
Mortgage lenders will need to see documentation of your financial standing.
You’ll need last year’s tax returns and bank statements from the past few months.
If you’re an employee, bring along your W-2 and several pay stubs. For self-employed folks, you’ll need your 1099 and profit and loss statements.
If you have other funds you plan on putting toward your house payments, bring documentation for those, too. That could include gifts from family members, profits from the sale of large items or investment earnings.
5. Shop around.
Unless you get a great deal, don’t feel obligated to go with the first lender you meet. Shop around until you find an offer that works for you.
Look for a low-interest rate with a shorter repayment period and a low APR.
Once you find a rate you like, lock it in. Rates change frequently, so don’t hesitate.
Even armed with these tips on how to find a mortgage, you’re likely to encounter some tricky situations. Visit Credit Squared to learn how to avoid common mortgage mistakes.
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