Steps to Improve Your Mortgage Readiness

The mortgage loan process is long and winding on its own, so potential buyers should take advantage of any available method to simplify their home purchase.

1. Check Your Credit Score: There are several items that go into a lender’s decision about whether a homebuyer is creditworthy; however, the most important factor is your credit score. Knowing your score before meeting with your mortgage lender will make your process more straightforward. Not only will a lender use your score in the loan decision, but it will also dictate your interest rate. The better your score, the lower your rate. Use sources like www.AnnualCreditReport.com and www.MyFICO.com to access your credit report and be prepared to answer questions about derogatory credit items.

2. Assess Your Financial Situation and Budget: Your mortgage loan is a 15 to 30 year investment, so it is imperative that you are comfortable with the payment for the long haul. Estimate your monthly mortgage payment on the home values you are exploring and determine how this payment fits into your current budget, as well as how future life events (kids going to college, retirement, etc.) will change your budget. Be sure to consider all factors in your assessment including income, expenses, current and projected earnings, current debt, and all of the costs associated with your new mortgage (insurance, taxes, HOA fees, etc.) Use the calculators on our website to estimate monthly mortgage payments, compare renting costs vs. buying, and assess your overall home buying power, amongst other things.

3. Prepare to Provide a Down Payment: While the VA loan program allows for 100% financing, non-veterans are left with a minimum of 3.5 percent down payment on Federal Housing Administration (FHA) financing and a 5 percent down payment on Conventional financing. Most buyers need to prepare to provide a down payment on their home loan. Keep your down payment fund in cash or cash equivalent accounts, so that market movements don’t thwart your plans. This also allows you to supply the required documentation during your pre-approval.

4. Know What You Want in Your New Home: When shopping for a home, list the features or amenities that are most important to you, such as a fireplace, fenced-in yard or new appliances. Establishing your criteria for what you want and don’t want early on will help save time on shopping and use your time more efficiently. Additionally, having a checklist of your “non-negotiables” on your tours may keep you from buying a home on a whim.Keep in mind that buying a house is an investment, so one of your top reasons for buying a home should be the value you are receiving from acquiring this new asset. Must-have amenities should logically be sacrificed if an incredible value is available.

5. Be an Informed Buyer: Don’t just fall for an online photo – do your research. Review other homes, school information and crime statistics in the area you’re considering. A useful online resource for information is www.CityData.com. Doing your due diligence ahead of time ensures you’re getting a fair price in a safe location.

6. Obtain a Home Inspection: Even if the home you plan to buy appears to be flawless, remember that nothing can replace the peace of mind that comes with a home inspection conducted by a trained professional. Should your inspection reveal serious defects with the house, such as serious foundation issues or a termite infestation, you’ll generally be able to get your deposit back if these issues were not previously disclosed by the seller. The home inspection is a worthwhile investment prior to closing to ensure you have the ability to get the seller involved on any repairs that are needed. Unexpected repairs are simply a result of homeownership, but clearly identifying necessary repairs and issues prior to closing is crucial to reducing buyer remorse.

7. Purchase Home Insurance: Contact your lender to understand their insurance coverage and deductible requirements for your loan program. Review your options and make sure that you understand the difference between insuring your new home’s structure and the fixtures and contents that will be inside.

Note: If you are buying property that is close to water, make sure that you have an agent who can help you enroll in the National Flood Insurance Program.

Our team is here to help you every step of the homebuying journey. Contact one of our loan originators to discuss your mortgage possibilities.