Mortgage Insiders Share Their Secrets
Most first-time homebuyers are nervous when planning their home purchase and getting a mortgage loan. Understanding the mortgage process and what you need to do to prepare for it will help.
More than any other loan, the mortgage loan process can be intimidating to the average consumer. The process differs from getting a car loan or renting an apartment and applicants need to understand the differences to ensure they walk away approved rather than disappointed.
PeoplesBank has put together a list of five things they look for in an applicant that makes them a strong candidate.
#1 You Have Good Credit
A poor credit history can stop an application dead in its tracks. Still, some buyers fail to review their credit history before submitting an application, because they assume their scores are high enough. According to the Home Loan Learning Center, many loans require a minimum credit score. You should check with a PeoplesBank Mortgage Consultant to understand the restrictions.
What You Can Do: Pull your credit report and order your credit scores. Check for errors and potential identity theft. If you have any questions about your credit history, work with your Mortgage Consultant to understand the requirements.
#2 You Have Job Security
Sticking with your employer during the home buying process is crucial. Any changes to your employment or income status can delay or even stop the mortgage process. PeoplesBank approve mortgages based on the information provided in your application. Thus, taking a lower-paying job or quitting to become self-employed throws a wrench in the plans, and lenders must reevaluate your finances to see if you still qualify for the loan.
What You Can Do: Hold tight at your current job throughout the entire process.
#3 You Know What You Can Afford
Just because you can get pre-qualified for a home doesn’t mean you can actually afford it. Pre-qualification amounts are based on your income and credit report but they don’t factor in how much you spend on utilities and expenses like daycare, insurance, groceries and gas. Rather than applying for a loan on a more expensive house just because you can afford it on paper, be smart and keep your price within your means.
What You Can Do: When you start looking at homes, create a spreadsheet that allows you to input the purchase price, mortgage rate, utilities (of that house) and all your additional expenses, then calculate the total against your monthly take home pay to see if you can afford it.
#4 You’ve Got Your Down Payment
Walking in with zero cash available is a quick way to get your home loan application rejected. Down payment minimums vary and depend on various factors, such as the type of loan.
What You Can Do: Meet with your PeoplesBank Mortgage Consultant to discuss down payments. Establish your general purchase price and save at least the minimum, but aim for more if you can. A 20% down payment knocks down your mortgage balance and alleviates purchasing Private Mortgage Insurance (PMI).
#5 You Understand Your True Costs
A home’s purchase price doesn’t include all the costs you’ll incur after move-in. These are the “true costs” you’ll need to add up and make sure you can account for on top of your mortgage. For example, with older homes, you may pay higher homeowners insurance. Condos and townhomes often have homeowners association (HOA) fees and dues. Plus, many neighborhoods have association fees. Whatever you buy, you’ll also need to factor in the annual costs of maintaining your home.
What You Can Do: Talk to your realtor and Mortgage Consultant to find out all the fees associated with the properties you’re interested in and be sure to include them in your spreadsheet when calculating your budget.
Buying a house is already stressful, and being ill-prepared heightens the anxiety. Educating yourself is the key to staying calm and getting approved. Talk with professionals to help you set some goals, then implement a realistic plan and stick with it until the keys are in your hand.