Things You'll Need:
- Access to Financial Records
- Time
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Step 1
Try to get rid of as much of your debt as possible.
One of the things a loan officer considers when approving a mortgage is how much debt the borrower has. It is a good idea to pay off as much debt as possible before actually filling out a loan application.
This includes not only things like credit cards or car loans, but also unpaid bills that might show up on your credit report. -
Step 2
Figure out what you can afford. Lenders and real estate agents make more money by offering you a bigger loan. As a result, it is not uncommon for them to try to sell you a bigger home or larger loan than you can afford.
Before applying for a mortgage, you should have a clear idea of what you can afford in terms of a monthly payment. Take into account your current debt and your current income, as well as what might happen if you lost your job or were otherwise unable to work.
It is very easy to live above your means, so play around with an on-line mortgage calculator to see how much you can expect to pay for a monthly mortgage payment. -
Step 3
Begin saving money for a down payment. It is possible to get a no down payment mortgage, but these are often at higher interests rates and less favorable terms. Having money for a down payment gives the borrower many more options for finding a mortgage.
Due to our financial situation a down payment is becoming more and more important, as many lenders will not finance a home without one. Typically a 10% to 20% down payment is required from most lenders. -
Step 4
Save money for Closing Costs and home repairs. Closing costs can easily cost over $4,000 and this is not included in the cost of the home. It is also a good idea to have some money saved up to make home repairs and for moving expenses.
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Step 5
Get your paperwork in order. When applying for a mortgage, the lender will need to see proof of your income as well as any assets. This includes paycheck stubs, tax statements, and bank statements. It is a good idea to have at least the last two years worth of tax filings ready.
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Step 6
Spend some time calling banks and lenders to get an idea of mortgage interest rates. You can even go so far as asking the lender to pre-qualify you, which will give you an idea of what type of mortgage you would qualify for, without running your credit.
If considering an Adjustable Rate Mortgage(ARM) don't only think about the low introductory payment, but also consider what will happen over the course of the loan as the interest rate rises.
Comments
Alisiane said
on 7/23/2009 It's a shame that more people don't do this kind of research before entering into such a huge responsibility and undertaking.
bigearthguru said
on 7/7/2009 Great article about preparing to apply for a mortgage. Hopefully I will not need to take out a mortgage, but if I do, this will help!
sonni57 said
on 7/2/2009 You have a lot to prepare before mortgage application many people don't know this.
rockymtngrma said
on 7/2/2009 Your article outlines everything necessary to prepare for a home loan, whether it be for purchase or refinance. I especially like the suggestion to shop for lenders. Rates and terms can vary so much! It's critical to get the best deal possible. You'll be living with your loan a long time. Thanks for the article.
kristara said
on 7/2/2009 Very helpful advice. Mortgages are very tricky these days 5*