If you are planning to buy a home and apply for a mortgage loan, there are many steps you will need to take. In face, we have identified 7 critical steps every home buyer should complete to ensure a smooth and successful home purchase. If you haven’t already checked out the Moreira Team Buying a Home Guide, you should visit click on the link and read the whole guide.
7 Steps to Consider When Purchasing Your Home
Check this Guide Out! It is a must read if you are about to buy a house.
Step 1: Buying A Home – Get Your Finances in Order
In today’s article, we want to focus on the very first step featured in our home buying guide. In our opinion, the first thing you need to do is get your finances in order. If not, you could be facing many different challenges that will hinder your ability to qualify for a home loan or make attractive purchase offers. There is nothing more disappointing than putting an offer in on the home of your dreams, only to be denied because your financing situation doesn’t look strong in the eyes of the seller.
Step 2: Be Mentally and Financially Prepared – First Time Home Buyer Tips
Buying a house is a major investment, and it will likely be the biggest purchase you ever make in your lifetime. You should not go about home buying casually unless you have a solid plan laid out. You need to be mentally prepared for such a significant investment. In addition, you must have your finances in order before you even think about searching for a new home.
Step 3: Understand Your Financial Health
Mortgage lenders will be analyzing at your entire financial history—past, present and future–before they issue you a mortgage loan. Houses aren’t cheap and lenders aren’t willing to take significant risks on borrowers. Depending on where you buy, you may be looking at borrowing hundreds of thousands of dollars. Over 30 years with interest and other fees included, monthly mortgage payments add up quickly. If the lender or bank doesn’t think you can keep up with those payments, they are not going to approve your mortgage loan. Here are some important financial factors lenders will look at:
Credit Rating (aka FICO Score)
Employment History
Current Monthly Income
Existing Debts (Credit Cards, Student Loans, Car Loans, etc.)
Debt-to-Income (DTI) Ratio
Savings
Down Payment Amount
You can’t hide your financial history from the banks and lenders. It will all be reviewed carefully by loan underwriters. If you have a good credit score and healthy overall financial standing, you will stand a better chance of qualifying for a loan. It will also help you qualify for better interest rates and more favorable loan terms. Those with lower incomes and lower credit ratings may still be able to qualify for certain loan products like FHA Loans and VA Loans.
Step 4: Improve Your Financial Standing
As you prepare to buy a home, you should be working to improve your financial standing as much as possible. Pay down your debts, build up your savings, make sure you have a stable income and try to increase your credit score. Do everything you can to make yourself a more attractive mortgage borrowing candidate and it will make the process so much easier when it comes time to apply.
Stay tuned to the Moreira Team Blog over the coming weeks as we continue this series and highlight all 7 steps you need to take when buying a home.
In the meantime, be sure and check out our Buying a Home Guide. There is a wealth of information there that will really help you to make the right decision.
If you have any questions about mortgage lending or think you are ready to apply for a mortgage loan or home refinance, contact us today!
It’s this last topic we want to focus on today because it is a question we get a lot at Moreira Team.Securing the Best Mortgage RateUltimately, your goal with a mortgage is to lock in the lowest rate possible.
When your financial situation is strong and you have a good credit history, you present less of a risk.
Having credit cards, student loans, bills and car loans can all be beneficial toward your credit rating as long as you pay your bills on time.
These steps will go a long way toward helping you get approved for a mortgage loan while also securing the best interest rate.
The answer isn’t super simple because the score requirements can vary with different types of home loans.
Examples include VA Loans and FHA Loans.Generally, the home loan with the lowest possible credit score requirement is known as a “portfolio mortgage loan.” These may be available to borrowers with a minimum credit rating of 500.
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