You can purchase a home even if you have less than perfect credit, lack a 20 percent down payment, or carry more debt than you want. Lenders look at more than one factor when determining eligibility. If you have one weak area, other positives can compensate for the rough spot. For most buyers, financing is an essential piece to the puzzle of home ownership. Here is some essential first mortgage advice for new home buyers.
A Quality Mortgage Is Not All About The Rate
Just as finding the perfect home is not all about price, choosing a lender is not all about the rate. In today’s competitive market, interest rates among lenders are very close. This means that it is essential to consider other variables that impact the total cost of the loan when researching the right options for you. Factors to consider include personal financial strength, paid points, total closing costs, application fees, and lender programs. You should also consider if the lender is focused on your needs, qualifying you for the best loan program, and working with a responsive underwriting team.
Before meeting with a lender, gather all essential documents. These typically include two years’ tax returns, 30 days of pay stubs, and bank and investment statements. These papers establish your income and financial strength and create a 60-day paper trail for assets used as the down payment.
Know Your Credit Score & Financial Strength
Everyone qualifies for a free credit report every twelve months from all three major credit bureaus at www.annualcreditreport.com. Review a copy for each applicant for accuracy. Dispute errors and rectify any delinquent marks for the best chance of approval.
After a credit report review, get your free score from a bank or credit card company you do business with or a company such as Credit Karma. The credit score is a numerical calculation based on information found in your credit report.
When writing mortgages for new home buyers, banks consider income, assets, debt, credit and financial stability. The stronger each piece of your financial puzzle, the more solid the application. You can compensate for weaknesses in one or more areas by focusing on financial strengths. For example, there are programs that help buyers who have good credit but a small down payment get into a new home. A quality lender will review potential programs based on your circumstances.
Get Pre-Approved Before Committing to a Contract
Falling in love with a home only to find out that you cannot get the funding is a heartbreaking experience. A pre-approval sets realistic expectations on a first mortgage amount you can afford. With a pre-approval, the lender reviews your income, credit reports, and bank statements before establishing an estimated loan amount for your new home. The mortgage provider will also take into account your down payment for the total purchase price.
Using this first mortgage advice such as paying down debt or increasing the down payment might enable you to qualify for a larger loan or free up funds for desired upgrades in your new custom home.