Our Folsom mortgage lender team knows that the home buying and mortgage application process can be a stressful thing. There’s a lot of documentation to gather, homes to view, and preparations to be made. This is why we recommend that you make yourself a checklist of what is needed to help keep you organized and keep the process running smoothly. Here are some important things that should be on your checklist as a first-time homebuyer.
Before you start looking for a home or begin the mortgage application process, you need to check your credit score and credit report. This should be at the top of your list because your credit is what helps lenders determine whether you qualify for a mortgage, what type of mortgage you can get, what interest rate you get, and how much you are able to borrow.
Start by getting your credit report and go over it with a fine-tooth comb. If you find anything that looks incorrect, contact the credit bureau to have it updated or removed. You may find that your credit score is actually better than you thought.
Second, on your checklist should be sorting out your finances and creating a budget. You shouldn’t start shopping for a home until you know how much you can realistically and comfortably afford. It will save you on time and disappointment from viewing homes that you later find are out of your budget. There are many online tools that you can you to get you started, such as mortgage calculators that can show you what you are likely to get from a mortgage based on your budget.
The down payment is another important part of the mortgage process and is something that you should start saving for well ahead of buying a home or applying for a mortgage. You will need to have at least 20% of the home’s market value. You can put less down and still qualify for a mortgage, but this will mean getting a higher interest rate and possibly having to pay mortgage insurance. So, the more you are able to put down, the better off you will be. Some people start saving for their downpayment a couple of years before they start the home buying process.
Let’s face it, the mortgage process requires a lot of financial documentation. You will need things like 3 months’ worth of pay stubs and bank statement, 2 to 3 years worth of income tax reports, a letter if someone is gifting you the funds for a downpayment, and other documents depending on your situation. It makes sense to gather all of these things ahead of time so that you aren’t left scrambling around for them later on. It will make the process go more smoothly and faster.
One mistake we have seen many new homebuyers make is going with the first mortgage offer they are given by their bank. What you should do is shop around for the best mortgage deals that suit your needs. Also, keep in mind that banks will only show you the mortgage packages that benefit them. If you find a better offer from a different lender than your bank, you can ask them to match that deal. Or you could use a mortgage broker, who has access to mortgage deals that you won’t find on the mainstream mortgage market.
Getting pre-approved for a mortgage can be really beneficial. For a start, you will have a clearer idea of how much you will have to work with. It also gives you an advantage when putting in offers on a home. Most sellers and real estate agents will choose an offer from a person with a pre-approval because it’s more of a guarantee that the sale won’t fall through at the last minute, and that it won’t take as long as someone who still has to go through the mortgage application process.
If you have questions about the mortgage process and what you need to get you started, give our Folsom mortgage lender team a call today. We’ll get you on the right track!