How to apply for a mortgage is one of the most confusing questions an individual can ask. In fact, there are literally hundreds of mortgage companies and brokers to choose from. The process of applying for a mortgage can be very complicated, so it is important to have a clear strategy before beginning. The following steps to follow when applying for a mortgage will help you be more successful:
Key points to take note of prior to applying for a mortgage: Your credit history, employment history, income, assets, debt, and your spending and budgeting habits. Confirm that your credit rating is good and that your credit report is error free. Research and compare mortgage offers. Get pre-approved for a certain loan amount at a certain interest rate. Assemble your mortgage paperwork.
To calculate your debt-to-income ratio, calculate the total monthly mortgage payment plus all other miscellaneous debt such as credit card debt, car payment, utility bills, and the remainder of your household expenses. Remember to include the mortgage payment and any applicable fees. This calculation is for the entire life of the mortgage loan. For buyer 1, the total mortgage payment will include closing costs, which are subtracted from the total of the mortgage applied for.
To be qualified for a specific mortgage offer, you must meet minimum qualification standards. To do this, review your financial history. Review your debt to income ratio. Review your spending habits. These steps will help you know what lenders are looking for, and you will know what to bring to the table when negotiating for mortgage rates and terms.
Your credit score will play an important role in getting pre-approved or pre-qualified for a mortgage loan. When shopping for mortgages, make sure your credit scores are in good shape. If your scores are poor, do not expect to find favorable mortgage offers. The reason is that lenders will use your credit scores as a sign of how you will handle paying back the mortgage loan. Your mortgage company will consider whether you will pay your loan back promptly, have the ability to make your monthly mortgage payment, and will view you as someone with some discipline if they see that you pay your loan on time each month.
You can reduce the risk to the lender by paying down your mortgage loan on time every month. Many homeowners overlook this aspect of their home loans, and as a result they often end up getting defaulted on their mortgage loan. If you do not have enough cash in hand, it would be prudent to put some money into savings. It is possible that you will not be able to save enough money, and in that case you may need to look for a mortgage loan on the secondary market. It would be prudent to choose a mortgage loan that has a low interest rate, low fees and charges, and lowest closing costs.
Once you have decided on the mortgage that has the lowest fees, charges, and closing costs, submit your mortgage application. Make sure that the lenders have your most current information; include your financial statements, employment history, and a credit report with a clean report. Some lenders require that you fax or mail in a copy of your checking account statement, but most of the time you do not need to fax or mail this information.
When you are submitting your mortgage application, some lenders require you to fax or mail them a copy of a utility bill, your tax returns, and/or a recent bank statement. In addition, some lenders require you to supply them with copies of your most recent bank statement and/or tax return, as well as a recent pay stub from your employer. Your lender may ask you to supply a voided check that can be used for verification purposes. If you need to pay any cash fees before the loan is finalized, make sure that you inform your lender. Failing to pay the fees on time could cause your mortgage application to be rejected.