Getting Prepared for Mortgage Application Process
There are several steps you should take before you start your house search, in case you think you are ready to purchase a new home. It is important that you get your finances organized. Not only do you need to systematize your finances so you can decide how much you can afford, you will also need to supply the mortgage lender with precise information that will be used to decide whether or not you meet the criteria for a loan and what terms and rates you will receive.
Check into Your Credit
The first step you should take toward organizing your finances is taking a look at your credit report. You are permitted to a free credit report once per annum and you can get it by visiting to www.annualcreditreport.com. This is the best place to go for your free credit report, because there are no strings attached.
Once you obtain your free credit report, look through it in order to make sure all of the information is accurate.
If you find that anything is incorrect, get in touch with the credit reporting bureau and let them know about the error. Then, wait until the problems have been determined before you start the process of applying for a mortgage loan.
Gather Your Paperwork
You need to start gathering paperwork to share with the mortgage lender only when you are sure that your credit report is looking as good as possible. The paperwork that you need to gather includes:
Income tax returns for the past three years Bank statements from the past three months Copies of your current pay stubs and records of any additional income you may have Receipt of credit issues that have been resolved Copies of bankruptcy or divorce settlements
This information will help the mortgage lender form an overall picture of your financial situation. You need to be certain to bring in as much documentation as possible to demonstrate that you are on track and doing better where your finances are concerned in case you do have some red marks on your credit history.
Pay Your Debts and Save Up
If you have buried yourself in a large amount of debt, you should take steps to remedy that problem before you apply for a mortgage loan. If possible, even small debts should be paid off.
In addition, you should avoid acquiring new debt. The chances of being approved improves if you less debt when applying for a mortgage loan.
The assets you have will also play a role in determining whether or not you are approved for a loan.
Areas the mortgage lender will consider include:
Your savings account Any investments you have, including bonds, stocks, and mutual funds The cash value of your insurance policies Monetary gifts provided by family members Your monthly salary
Although it is possible to get a mortgage loan with a less-than-desirable credit history and with little money in savings, you will receive better terms and a better interest rate if you take these steps prior to applying for a loan.
