So you think you’re ready to take the plunge and purchase your first house. Congrats! Homeownership is a big, exciting step — but getting your first mortgage can be quite complex, involving many steps. That’s why it’s important to prepare as best you can before shelling out the down payment.
Taking the right steps to start with make it far less complicated down the road. Before signing on the dotted line for your mortgage, take these steps to ensure that the process goes smoothly and efficiently.
Get a copy of your credit report - You can retrieve a free credit report from each of the three credit bureaus at AnnualCreditReport.com.
“In addition, the standards are higher in terms of what score you need and how it affects the cost of the loan,” said Mike Winesburg, a former mortgage planner with McKinley Carter Wealth Services in Wheeling, West Virginia. While it’s beneficial to pay everything on time, that doesn’t always mean your credit score is where it should be. The lower your utilization rate (your available credit limit) the higher your score will be — and in order to obtain a mortgage, you’ll want to have a lot of credit available, with less than a third of it in use.
Get preapproved - Ensuring that you’re preapproved for a loan makes the home-buying process a lot easier on you. So before you even begin your search, make the process of getting preapproved mandatory. And along with that, be patient.“[Buying a home] is really like finding a job — it’s going to take a lot of time to prepare,” said Cara Pierce, a certified housing counselor with ClearPoint Credit Counseling Solutions. “That way, when the deal comes along, you’re ready to pounce on it.”
Track your spending -“If I were a first-time homebuyer and I wanted to do everything right, I would probably try to track my spending for a couple of months to see where my money was going,” said Winesburg. Even if you aren’t in debt and you pay your bills on time, it’s important to evaluate how you spend your money. So, for example, are you able to sock away extra funds at the end of each month or do you typically live paycheck to paycheck? When you’re pursuing your first mortgage, it’s important to have a good idea of what’s coming in and what’s still owed.
Get rid of debt -It sounds simple, but it makes a big difference. Not only does being debt free make it more likely you’ll get preapproved for a decent loan, but paying your mortgage each month is much easier if you aren’t still paying off debt. It’s also not wise to be purchasing expensive items around the same time as buying a home — for example, a car.“It would be much easier to own a home if you can show a history of saving and not have gotten yourself into too much debt,” Norris added.
Organize documents in advance -Paperwork isn’t the most exciting thing in the world, but lenders do typically require an array of documentation when issuing a mortgage — things like your W-2s, bank statements and tax returns. Gathering these items ahead of time can ensure that nothing gets delayed and you can move on to owning your home as quickly as possible.“You need to be organized and be able to pull all this information together,” said Cara Ameer, a Coldwell Banker real estate agent. “What can cause delays in the process is trying to track down various pieces of paper the lender is going to need.”
Your financial institution is there to help and can walk you through the entire process, so if you’re considering getting your first mortgage, call or stop by to find out the options available to you.
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