Mortgage Applications Tips
How much home can you afford?
We all have dream homes but sometimes our dreams don’t line up with reality. Before you start looking for your dream home, you need to know what you can afford. Be sure to always purchase homes within your price range. Use this home affordability calculator from Nerd Wallet to determine how much you can safely afford to spend.
Check your credit and cease any new activity.
When applying for a mortgage loan, your credit will be a key factor in whether you’re approved or not, and it will also help determine your interest rate. It could possibly determine the loan terms and down payment. So check your credit before you begin the home buying process. Dispute any errors that could be dragging down your credit score and look for opportunities to improve your credit. Paying off outstanding debts will help greatly. If you are looking to get advice on what to do with your credit to get you in the best possible position, consult a professional and they can provide solid advice!
To keep your score from dipping and affecting your ability to buy, after you apply for a mortgage, avoid opening any new credit accounts, like a credit card or auto loan, until your home loan closes.
Compare mortgage rates
Many home buyers get a rate quote from only one lender, but this often leaves money on the table. Comparing mortgage rates from at least three lenders can save you more than $3,500 over the first five years of your loan, according to the Consumer Financial Protection Bureau. Get at least three quotes and compare both rates and fees. Locally, we have found that Movement Mortgage offers great rates and various loan options. They might be a good starting point for you.
As you’re comparing interest rate quotes, inquire on whether any of the lenders you are speaking with have quoted you with buying discount points, which means you’d prepay interest upfront in your closing costs (often paid for by the seller) to secure a lower interest rate on your loan. Sometimes it can make sense to buy discount points depending on how long you intend to stay in the property and the specific property you chose. You can use this calculator to decide whether it makes sense to buy points.
Get a pre-approval letter
It’s essential, before you go out to purchase a home, that you get pre-qualified for a mortgage, which simply is an estimate of how much a lender may be willing to lend based on your income and debts. As you get closer to actually buying a home, it’s smart to get pre-approval, where the lender thoroughly examines your finances and confirms in writing how much it's willing to lend you, and under what terms. Having a pre-approval letter in hand makes you look far more serious to a seller and can give you an upper hand over buyers who haven’t taken this step (especially in a multiple offer scenario).
To get pre-qualified/pre-approved for a loan today, speak to our recommended professional!