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January
28

Buying a Home - Read This Before You Apply for a Mortgage

Our real estate agents often hear from our new clients that the process of getting a mortgage is intimidating. That's understandable!

Having an experienced real estate agent on your side does a lot to make applying for a home mortgage manageable.

Even so, it's important to know a few things about the process. Once you learn more, you'll see exactly what you need to do to make things easier.

That can be just what it takes to make your worries evaporate. The truth is, most people learn getting a mortgage is quite a bit easier than they imagined. It just takes some preparation.

These four steps will make it easier:

  1. Get the Right Paperwork Together
    No matter what type of home mortgage you want, you'll need to document income before you can finish your application packet. This almost always requires a month of recent pay stubs from anyone on the loan and the last two years of tax filings. You'll also need at least three months of bank account statements – but collect six months' worth just in case.

  2. Know the 28/36 Rule
    The 28/36 Rule is a widely accepted, unofficial principle of mortgage lending.

    It goes like this:
    • Your monthly mortgage payment should be no more than 28% of your gross income.
    • All monthly bill payments you make should be no more than 36% of gross income.

    This isn't a hard and fast rule, and it doesn't always apply to government-backed mortgage programs such as those for first-time homebuyers. However, it'll give you a sense of how big a mortgage you may qualify for. The sooner you write out a budget, the more you'll know about your situation.

  3. Get Insight on the Market
    A good real estate agent is a walking encyclopedia of knowledge on the local market.

    Each real estate market has its own quirks, and some of these can influence how easy it is to obtain mortgage funding. Luckily, you won't have to search high and low to get the facts you need. Simply ask your real estate agent if there's anything special you need to know.

  4. Start Saving Soon
    The less debt you have, the better off you'll be when it comes to home financing.

    Ideally, you should start saving for six months to a year before you apply for a mortgage loan. There are two ways you can use any extra funds that will both be beneficial to you:
    • One, paying down any existing debt, such as credit card debt and car loans.
    • Two, saving cash so that you can provide a larger down payment on a home.

    Your financial situation dictates the best move for you. For example, paying down old credit debt will relieve you of some money worries and may make it easier to spend on your home.

    In some situations, having a big down payment isn't a priority. However, a down payment will cut the amount of money you have to finance and may even improve your interest rates.

  5. Getting a Good Mortgage Loan Package Comes Down to Dollars and Sense
    Make a few moves to improve your financial health – and choose the right home for your budget – and you could find getting a mortgage is a snap.

We help buyers with many different financing needs to achieve the dream of homeownership. To find out more, contact Cressy & Everett Real Estate.

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