What is the formula to qualify for a mortgage?
There are many factors to qualify for a mortgage. The key components are income, debt, downpayment, credit history, and loan amount.
What is the easiest way to get a mortgage?
This is simple. Make sure that your credit is in order. People with great credit can get a mortgage easier than people with poor credit. The good news is that you can prepare for your mortgage to improve your chances of qualification.
How to Prepare Your Credit for a Mortgage?
Are you planning to purchase a home anytime in the future? Unless you have the cash to pay for the house without financing, you are going to have to apply for a mortgage. Your credit score is a critical factor in the mortgage application process. Before you apply for a mortgage, be sure that your credit is in the best possible shape.
Fortunately, mortgage applicants can do a lot to prepare for their mortgage application. If you neglected your credit score over the years, now is the time to bring it to the front. Preparing your credit is the recommended way to begin your mortgage journey.
How does the mortgage process work?
I want to share with you a few important steps that will help you prepare your credit prior to applying for a mortgage.
Order your credit report.
Before you start looking at possible mortgage rates, or consult a mortgage calculator, get a clear understanding of your current credit score. The fastest way to do this is by ordering a copy of your credit report from any of the three major credit bureaus. These are Equifax, Experian, and TransUnion. To get the most accurate reading of your credit, order your credit report from the three major credit bureaus. This is a great way to avoid any credit score surprises. However, do not request copies too frequently as this might negatively affect your credit score.
Review your credit report.
When you receive a copy of your credit report, you need to carefully review it. Watch out for incorrect data or discrepancies. For instance, confirm that the spelling of your name is correct. Double-check all of your details on the credit report, such as your address. Check for accounts that you don’t believe to be yours.
If you find anything questionable, work with the credit bureaus to resolve the issues as soon as possible. You don’t want a mistake to get in the way of receiving the funding you need to purchase a new home, especially if it is a minor error.
Make bill payments on time.
In order to secure a loan from lenders, you want to continue to improve your credit score over time. One of the easiest ways to do this is by making all your payments on time. A late payment or no payment might negatively affect your credit score and decrease your mortgage options. People with lower credit scores generally fail to qualify for the best possible mortgage rate.
Decrease what you owe.
You should focus on decreasing as much of your outstanding debts as you can. It is great to make payments on time. It’s even better when you can pay more than minimum payments. Pay off your student loan as soon as possible. Get rid of credit card debt. The sooner you pay off your debts, the better it will reflect on your credit. An excessive amount of debt makes you a higher risk borrower.
If you continue to increase your debt, lenders might not approve your mortgage application. Don’t let that happen to you. Decrease your debt to income ratio and increase your chances for mortgage approval.
Don’t make a purchase before you’re ready.
Buying a home with a home loan is a huge financial investment. Work hard to prepare your credit for your mortgage. Your home loan is a long-term investment. Take time to learn about your credit, clear up any errors, and make improvements before you start with your mortgage application.
How to Get Pre-Approved for Your Mortgage
Are you beginning the home buying process? You may be excited to start looking at homes right away. But there is a better way to start the home buying process. Getting pre-approved for a mortgage is an ideal first step to take in your home shopping process. The mortgage pre-approval helps you understand your loan options. A pre-approval may also help you make a more competitive offer on your dream house. While pre-approved mortgages are subject to conditions, if you verify your financial information up front, you’re one step closer to getting the mortgage.
Are you interested in learning more about what it takes to get pre-approved and why it’s so important?
Why You Need to Get Pre-Approved for a Mortgage
When you get pre-approved for a home loan, you become a more organized and competitive buyer. At the same time, a pre-approval can help you become a better-informed home buyer. With a pre-approval, you know what budget you need to stay within as you are searching for houses. It is best to start your home buying journey by getting your mortgage pre-approval out of the way.
Getting pre-approved for a mortgage demonstrates that you know what you are doing. Another person interested in the same house as you are without a pre-approval would be less competitive. The pre-approval could make your offer more appealing to the seller. The pre-approval shows the seller that you took the time to get a pre-approval from a lender.
In hot markets, some sellers may not even allow you to put in an offer on a home without a pre-approval. For all these reasons, mortgage pre-approval is one of the best first steps to take during your home buying process.
Pre-Qualified versus Pre-Approved
Just to clarify, getting pre-approved for a mortgage is not the same thing as being pre-qualified. To become pre-approved is a more in-depth and lengthier process. For pre-qualification, a lender might give you an estimate of what your mortgage may be and what interest rate might come with the loan.
On the other hand, if you are pre-approved, you have gone through a similar process as a complete mortgage application. You have provided financial information and required documents to a lender so that they can determine if you might be approved for a mortgage.
How to Get Pre-Approved
Each lender has a pre-approval process. When you speak with your lender, you need to double-check as to what information and documents they need to complete the pre-approval. A lender may request a long list of documents and information, but that’s OK because you would need most of the same documents for the loan application anyway.
The following are some of the most often requested:
- Pay stubs
- Tax returns for the past two years
- W2s
- Bank statements
- Proof of assets
- Proof of liabilities
- Proof of identification, such as your social security number, driver’s license, or passport
It also helps if you check your credit report before you apply for a mortgage pre-approval. You can get a free credit report at Annual Credit Report.com.
After You Get Pre-Approved for a Mortgage
If you are pre-approved for a home loan you can expect to:
- Receive conditional loan options.
- Get an estimate of mortgage interest rate options.
- Find out how much of a mortgage the lender might approve.
Among other things, the pre-approval could help you decide on the cost of the property you can afford and whether to get a mortgage that is 30 years, 15 years, fixed, or variable. Keep in mind that the pre-approval is not a guarantee. The pre-approval is an estimate based on the information you provide the lender. Nevertheless, the pre-approval is a great asset to have during your home buying journey, to improve your chances of buying your dream home. The mortgage pre-approval is extremely helpful for staying within a budget and showing to sellers how serious you are about buying the right home for you and your family.
For all the above reasons, getting pre-approved for a mortgage is a step in the right direction. It will help you stay on budget, demonstrate to lenders and sellers that you are a serious buyer, and hopefully result in you finding your dream home with the ideal mortgage rates that fit within your budget.
What Happens at Mortgage Closing?
Have you finally found your dream home? A seller has accepted your offer, and you’re one step closer to becoming a new homeowner. You may want to know about the next steps in the process once you reach this point, though. You’ve probably worked hard to find the best mortgage rate and home loan with the help of a lender. When looking for your house, you likely tried to stay within your budget, too. Now comes the moment when you finalize the mortgage, take ownership of the home, and reap the rewards of all your hard work.
So, what exactly happens at the mortgage closing? Keep reading for some insight into this final step during the home buying process and what you should know before signing on the dotted line.
What Is Mortgage Closing?
The mortgage closing is the final and most important part of your mortgage journey. The loan closing is when you sign all the necessary documents to finalize your mortgage. First, you will sign the documents relating to your mortgage and loan as agreed upon between you and your lender. At the same time, you will accept the terms of the mortgage.
Generally, during this meeting, you will also sign documents making you the legal owner of the house, too. If that does not happen during the closing, you can agree on a date to finalize the process with the lender, seller, and anyone else who should be part of the process.
As you are finalizing so many important documents, this can be a stressful time during the house buying process. Keep in mind that you should review all the documents very closely in order to not miss anything. Additionally, you should take this time to ask any and all questions you may have before signing any contract.
Who Attends a Mortgage Closing?
For your benefit, you may want to bring an attorney to the closing to help with anything that may come up. (Note: Some states require the presence of an attorney during closing.) You are dealing with two critically important documents. Make sure that you understand what you are signing. An attorney may be of assistance.
Other individuals who may be present during this meeting:
- Escrow company representative.
- Your lender or lender representative.
- The seller or seller representative.
- A real estate agent.
- The buyer’s or seller’s attorney.
Steps of a Mortgage Closing
Let’s look at the steps that happen during a mortgage closing, so you know what will happen and how to prepare for the big event.
Once you have reached this stage in the process, you have likely completed a home inspection and dealt with any issues that may have come to your attention. You probably have reached out to a home insurance provider to buy the required home insurance coverage.
Once you have reviewed the closing documents, you will agree to the terms of the mortgage. This is normally known as a mortgage note. You will also sign a Truth in Lending Disclosure Statement that addresses the loan rates.
The signing of the home deed is next. The deed is the legal document that transfers ownership of the home from the seller to the buyer. Just as with the mortgage documents, review this closely to make sure the details are accurate.
Finally, there may be payments made depending on any home loan closing costs. The buyer may owe the lender money for escrow or additional closing costs.
After these steps have been completed and you have signed the loan documents, you can receive the keys to your new home. Although this is an exciting time in your life, don’t rush the process. You want to be as thorough as possible in order to ensure that you understand the terms of the mortgage, the rates, and everything about the home you are purchasing.
Tips To Manage Your Mortgage
After a lot of hard work, blood, sweat, and tears, your dream has finally come true. You officially own a home. As you went through the process, you have learned a lot about your budget, what the best mortgage rates are, and how to find the best home loan for your financial situation.
You did it. You are now a homeowner. It’s time to think about how to manage your mortgage. The hard work doesn’t end after you sign on the dotted line. This is a great time to learn the best ways to manage your mortgage, including making mortgage payments on time each and every month for the life of the mortgage. Follow along with these tips to learn how to manage your mortgage.
Tip #1: Always make your mortgage payment by the due date.
Your mortgage isn’t a payment you can delay or ignore. In order to make sure you don’t miss a payment, you should consider taking some proactive steps.
Depending on your personality, you might be the type of person who never forgets a due date or deadline. Others prefer to have a safety net or monthly nudge to make that payment on time. One great way to prevent a late payment is by setting up automatic payments through your lender. That way, even if the date passes and you forget, the money will automatically transfer. All this takes is a little bit of planning to set up in the beginning.
Another option is to set reminders for yourself on your phone, on your agenda, or on your calendar. The key is to stay proactive about making every mortgage payment without delay.
Tip #2: Deal with late or missed payments immediately.
If you miss a mortgage payment, contact your lender as soon as possible. When speaking with the lender, be sure to explain the situation clearly so that they understand what went wrong. Make the mortgage payment as soon as possible so that your account is up-to-date. Don’t delay payment and communicate with your lender if there is a problem.
Tip #3: Start saving money by making extra payments.
Do you want to save money during the life of your mortgage? Make extra mortgage payments along the way and save money. Extra mortgage payments help you pay off your mortgage faster. Did you get a raise, earned a bonus, or had extra income, you could use that money to make extra payments.
The sooner you pay off your home loan, the sooner you can put extra money into your retirement savings. On top of that, you won’t have to worry about mortgage interest rates any longer. During the life of your home loan, that means you’ll end up saving money if you manage to pay off the mortgage sooner than anticipated. Note that if you make additional payments on your mortgage that aren’t expected, you need to mention that it is a principal payment.
Tip #4: Create a solid budget and stick with it.
When you finally own your home, you may feel the desire to invest in it further by renovating, buying furniture, or doing a few home projects. The safest approach is to spend conservatively when you first purchase your home. Along the way, there might be unexpected expenses. That’s one reason why it is so important to start saving before you start spending more.
Only invest money in your home when it easily fits into your budget. Create a budget based on your income and expenses. Stick to your budget. If any extra expenses come up, use your savings to pay them off while making sure you make all of your mortgage payments on time.
