3 Things to Do Before Applying for a Home Loan
For most, buying a home is a one-time (maybe two-time) purchase. Typically, your first home is labeled the “Starter Home”; the one that will expose you to the truth of what it means to own a home. The second home, might be your “Forever Home”. Either way, it’s not a journey you’ll take often. And the process can feel overwhelming if you haven’t done your homework.
Check out these three things to do before getting pre-qualified for a home loan.
Check Your Credit Score
Credit scores are one of the first items a lender will consider when an individual or partners submit a home loan application. Before speaking with a lender, it’s important to know what they’ll be reviewing.
Timely payments
If there are current delinquencies-6 month timeframe
Debt-to-income ratio
FICO credit score
Learn more about your credit score and receive your free annual credit report.
Know Your Monthly Income and Debts
Write down all income sources and any debts that go out monthly. If your debt to income ratio is more than 43%, it can be considered “risky borrowing” depending on the type of debt.
To better understand how much purchasing a home could change the income vs. debt scale, look at any rental and/or transportation current costs. Moving closer to work may cut down on transportation costs, allowing for some room in what you’re willing to spend on a home.
Not sure what the reasonable monthly mortgage payment should be in your state? HUD guidelines state that mortgage payments should not exceed more than 28% of your pre-taxed income. This creates a standard for fair market pricing based on a family’s median income.
Use our purchase calculators to see how much home you can afford and if you pre-qualify.
Save for the Down Payment and Closing Costs
There are a lot of different expenses that a first-time home buyer will experience. The two most common are the down payment and closing costs. Programs are available to as little as 3% down on home loans.
Down Payment: Money given to the home’s seller, expressed in percentages, to ensure a financial interest in the home.
Closing Costs: Fees and expenses that are paid to the companies and individuals involved that assist in securing the mortgage. This can include:
Lender's origination fee
Deposit verification fees
Attorney's fees
The appraisal fee and any inspection fees
Cost of title insurance and title examination
Property survey
Credit reports (actual costs)
Transfer stamps, recording fees, and taxes
Be Prepared for the House Hunting Experience
Questions about homeownership? Our mortgage loan officers are here for you.
