Buying a new house is a special occurrence that ought to be celebrated with everything you’ve got. Unfortunately, it’s often difficult to celebrate buying a new house with all of the paperwork, calculations, and hustle needed to apply for a mortgage. It’s not uncommon for people to be too under-prepared when applying for a mortgage, but it’s also common to spend too much worrying about what needs to be done and thinking about all the things that could go wrong. To avoid all unnecessary trouble, here are 7 things you need to know before applying for a mortgage to make buying a new house a more pleasant experience.
1. The Documents
Before anything, you need to be aware of all the documents you need to prepare before taking any official steps. Generally speaking, it’s safe to assume that most lenders will inquire about the following documents:
Proof of income, such as bank statements, pay stubs, employment letters, or any proof that you’re financially capable of paying off your mortgage in a timely manner.
Tax Returns, especially one to two years’ worth.
Any standing debts and their repayment plans.
Your assets, like ongoing investments, bonds, or saving accounts; any kind of assets that strengthens your financial profile.
Residential history.
Any documents stating financial support in case of receiving any gifts or loans from family or acquaintances aiding in making the downpayment.
2. Choosing Property
It might be tempting to latch into a house that you’ve developed a liking to, but good things come to those who are patient. You’ll never truly know whether or not you’ve struck the best deal you can, with your current financial capabilities, without conducting thorough and accurate research of the market. The more you look into the market you’re interested in, the better your understanding of the true value of properties you’re looking into. You’ll then be able to asset the property for what it’s worth; differentiating between a diamond in the rough and a losing a deal.
3. Understanding Loan Options
You’ll do well to remember that there are a lot of things that go into conjuring a mortgage loan other than its interest rate. Interest rates sure are important, but choosing a loan solely on that can very well lead to serious issues down the road.
For instance, you should be well aware of the refinance costs, whether the interest rate is fixed or variable, and repayment schedule, duration, and flexibility. Check out this great article from Lowermybills.com, which will help you decide whether you should Lock in your mortgage rate today. Furthermore, you don’t want to be fined in case you make any early payments, so make sure you’ve read and understood all the loan terms before signing up. While you’re at it, make sure to research all your financing options before deciding that a mortgage is your best course of action.
4. Working with a Loan Officer
Throughout your journey of looking into properties to scanning through different mortgage options, a loan officer will be the one acting as your guide towards the best choice. There’s no denying the role a loan officer plays in this process, and this useful source provides all the information you need to know what qualifies loan officers to take on this responsibility. You should expect from a loan officer unbiased and non-exploiting guidance that starts with asessing your financial situation, laying down the best options you got, and finalizing the paperwork for your preferences – typically charging you with 1% of the total loan amount.
5. What About Your Credit Score?
Applying for a mortgage is, in its simplest forms, just asking for a loan – and what’s the first thing that all lenders inspect before considering an applicant? That’s right, their credit score. Even though there are loan options for people with bad credit, maintaining good credit, or doing your best to improve your current bad credit, will significantly improve your odds when it comes to mortgage options.
6. Pre-Qualified Vs. Pre-Approved
Being pre-qualified is a quick way to get an estimate of the amount of loan you can get while being pre-approved is a more extensive process that gives you an official conditional commitment from the bank stating the amount of loan you can get. This gives you an advantage over other potential buyers eyeing the property you’re interested in.
7. Home Inspection Records
Once you’re almost settled on a property, make sure to get it fully inspected before committing to the purchase. A home inspection record will serve in determining the real value of the property while showing any issues or repairs required that would cost you down the road.
As exciting as it can be, there are a few things you need to know before applying for a mortgage. Things such as researching the market, preparing the documents, and understanding the process are basic steps everyone should do. Meanwhile, maintaining a good credit score, getting pre-approved, and conducting a home inspection will ensure a smoother experience.