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Buying a home involves many moving parts, and those parts must move in sync. To complicate matters even further, many buyers spend so much time focusing on the home itself that they often forget that it is actually the mortgage approval process that can make or break the deal. A mortgage rejection can be devastating, leaving you to believe that you have been treated unfairly. On the flip side, getting a mortgage that you can’t afford can eventually lead to foreclosure. If you go through the process aware of all the steps and potential pitfalls, it will go more smoothly and you will have a better chance of finding yourself the right mortgage for you. Start building your mortgage knowledge with these five things your mortgage lender wants you to know.
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You should research your credit history and credit scores in advance
If you want to buy a house, you need to know the magic number – your credit score – and you need to know it as soon as possible. If it’s not good, you will need a lot of time to try and improve it. According to Experian, credit scores are defined as follows:
800 – 850: Exceptional
740-799: Very good
670-739: Good
580 – 669: Fair
300-579: very poor
The specific score desired may vary by lender, but generally lenders want borrowers with good credit. A very good or exceptional score can lead to better interest rates and terms. However, if you don’t have at least a fair credit score, you might not even qualify for a conventional mortgage, and if you do, your interest rates could be astronomical.
“Most credit card companies, such as Visa, Mastercard and Discover, offer free services so that all of their customers can get their credit score for free,” says Michael Borodinsky, vice president / regional branch manager at Caliber Home Loans in Edison, New Jersey. “In addition, credit bureaus such as Experian offer a more comprehensive way to review their credit history and current scores,” he says.
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You should work with a mortgage professional to assess your purchasing power in advance.
Whether you’re a first-time buyer or haven’t been looking for a home for the last time, it’s best not to go it alone. “Working with a mortgage professional will help you determine how much mortgage loan you qualify for, get an up-to-date mortgage rate reading, etc.,” Borodinsky says. For example, most buyers assume they need a 20% down payment, but according to Borodinsky, your mortgage lender knows there are many programs that allow much lower down payment amounts. “In addition, there are down payment assistance programs and local down payment grants available to qualified buyers, depending on location. Working with a mortgage professional can help you discover creative ways to make your homeownership dreams come true.
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You should be pre-qualified before you start looking for accommodation
You might be wondering why prequalification is so important when you are just in the “looking at the houses” phase. “While it may seem trivial, early prequalification is becoming even more essential in today’s tight market,” says Andrina Valdes, COO of Cornerstone Home Lending in Houston, Texas. With home inventory currently at an all-time low, she says there is a lot more competition among buyers. “First and foremost, prequalifying for a mortgage (which can be done online or through an app) can tell you exactly how much home you can afford so you don’t waste time looking around. wrong price range. “
Plus, prequalifying makes you more attractive to a seller, especially in a competitive market. “A pre-qualified buyer who enters a multiple offer situation may seem more appealing to the seller because their loan is less likely to fail, and the sale is also more likely to close quickly compared to a buyer. who hasn’t started the mortgage process yet, ”says Valdes.
You must take out home insurance
Another thing mortgage lenders would like you to know: you’ll need home insurance before you close. “No matter what type of loan or property you buy, many buyers don’t know or forget to purchase home insurance before the closing date,” says Loren Howard, Founder of Prime Plus Mortgages in Scottsdale, Arizona. “It can delay your closure and cost you money in fees, and you can also lose your property if you don’t close, so making sure you have home insurance is so important.”
RELATED: What You Should Know About Getting Your Money Back Mortgage Early
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While most buyers pay attention to the down payment, which may not be as high as they think, they tend to overlook other costs. “Most first-time homebuyers may not know that they will need extra for a variety of possible costs, including closing costs, home insurance, potential HOA fees, etc.,” explains Valdes.
The best way to avoid this mistake? Ask your loan officer for a list of what you may have to pay for. “Your loan officer should also be happy to tell you about some workarounds that could save you money, such as having your closing costs covered by a seller, which is more likely to happen if a seller wants to close the deal quickly, ”Valdes said. “Closing costs are typically 2-5 percent of the purchase price of the house, so if a seller agrees, it could save you over $ 3,000.” Either way, you need to know and be prepared for any costs that you may have to pay on closing.
