Buying a house entails a ton of work. It is a serious commitment that merits a great deal of planning and preparation to ensure that all aspects are precisely what, where, and how they should be. Furthermore, if you are purchasing a house for the first-time, you will likely need a mortgage. In fact, before even perusing online real estate listings and attending open houses, one should audit his/her mortgage options.
Prepare Your Financial Records
Expect to produce documents, beginning with an X amount of years’ worth of income tax returns and monthly bank statements. Fortunately, you can find copies of the latter in your bank's website. Simply log in to your account and print the Account Statement, which is usually in PDF format. Banks or private lenders will want a valid proof of income that implies the borrower's financial stability. Any outstanding debt should also be reported.
Use a Mortgage Calculator
If you have no clue as to how much your mortgage rates will cost, using an FHA mortgage calculator is the fastest and simplest way to put a solid number on it. The calculator can identify the lowest down payment and the highest FHA mortgage rate that is allowed when buying a property. It also generates an estimate of your closing expenses.
Consult a Mortgage Officer
A mortgage officer can help you identify any unidentified and unresolved credit issues that could restrict you from getting approved for a mortgage. Moreover, a mortgage officer can advise you regarding which properties you should focus your search based on specific factors like budget and family size.
Settle Your Debt First
Wiping the slate clean is an important step towards securing a mortgage for your house. Banks and private lenders look at your debt-to-income ratio. A high ratio could raise red flags from the bank's perspective, so it is best to settle any outstanding debt beforehand.
Develop Good Credit Practices
Late payments or insufficient payments on your loans can lower your credit score considerably. This can make applying for a home mortgage difficult and/or more expensive. Keep in mind that once an unpaid bill or loan gets sent to collections, it will take a long period of time for your credit scores to recover from the damage.
Buying a home can be an exciting process and a dream come true for many individuals and families. However, without any knowledge of how mortgage works, it can also be a financial landmine. Use the five tips above to simplify home-buying and make the right choices every step of the way.
About the Author: Lizzie Weakley is a freelance writer from Columbus, Ohio. She went to college at The Ohio State University where she studied communications. In her free time, she enjoys the outdoors and long walks in the park with her 3-year-old husky Snowball. The information in this article is credited to Nasa Federal Credit Union which recommends using an FHA mortgage calculator to help you find the best rates for your financial needs.