7 Tips Before Applying for a Mortgage
Taking on a mortgage is one of the biggest financial decisions we make as adults. With such an important financial decision, it’s crucial to take your time and do your research before applying for a mortgage. Here are ten tips to keep in mind before contacting a mortgage lender.
Check Your Credit Report
This is undoubtedly the very first step a future homebuyer should take before applying for a new mortgage. Your credit score can give lenders a good indication of what kind of loan you may qualify for. If there are any mistakes or misreporting happening on the report, it’s important to catch it early because fixing issues can be a time-consuming process. Luckily, there are many free ways for consumers to check their credit report for inaccuracies.
Establish Consistent and Stable Income
No matter what you do for a living, it’s important to have stable and consistent employment history to provide to your lender. If you don’t happen to have consistent employment, now is the time to start. Even a few solid months of consistent employment history can help on your journey to buying a home.
Pay Down Your Debts
Once you pull your credit report, you will be able to see what kind of debts you owe. Paying down your monthly recurring payments is a great way to lower your debt-to-income ratio, which is an important factor that lenders consider.
Avoid Making New Large Purchases
This is a big one that people can often forget. Taking out a new mortgage is a huge financial decision and lenders need to know the borrower can handle the debt. One consideration they take in mind is how much debt you have and how often you apply for more credit. So before you apply for a mortgage, avoid large purchases like buying a new car or opening up new lines of credit.
Research Loan Types
There are so many different kinds of loan types out there! It’s helpful to get a basic understanding of your options before talking with a lender. Do your research and look into the different types of loans you may qualify for. We highly recommend looking into programs that your state offers, as well.
Collect Your Down Payment
Before you apply for a mortgage, you want to make sure you have enough money saved for a down payment. A typical down payment is about 20% of a home’s purchase price. Use online mortgage calculators to determine how much home you think you can afford, then calculate the down payment that way.
Look at Reviews for Lenders
There are so many different lenders to choose from. You want to take the time to research and find the lender that’s right for you. Ask around with your coworkers or friends to see if they have any recommendations for who to use.
Applying for a mortgage is a big financial decision and one you shouldn’t make alone! It’s never too early to contact a real estate agent and start asking questions. If you are looking for a real estate agent who knows the Baltimore area and can help you explore your options, I’d love to meet with you. Reach out to me through my website or give me a call at (302) 545-8569, and follow my blog for more home buying tips!