The mortgage process can seem daunting if you jump right in without any preparation. There are some steps you can take to make this process run more smoothly for you.
Here are my 10 Tips to help you prepare:
1.Credit Report
The first step a lender will take in your mortgage process is to pull your credit report. Regularly monitoring your credit report is a good idea, regardless of whether you plan to buy a home. It is essential when you are preparing to purchase a home. Review the report to ensure no discrepancies, misreporting, or unusual activity that doesn’t belong to you.
2.Clear Any Discrepancies
Dispute any discrepancies you find on your credit report and get everything cleaned up. Ensure all accounts on your report belong to you and that you have not become a victim of identity fraud or misreporting.
3. Do Your Homework
The mere word “homework” may send shivers down your spine, me too! However, there is no need to memorize the periodic tables now. Research mortgage interest rates and brokers before you sign or commit to anyone. You will pave the way to better rates and terms.
4. Be Realistic
Owning a home is the American Dream, but you need to be realistic. The higher your credit score, the easier it is to get the amount and rate you want to purchase a home you can afford. The advertised lower rate may require a larger downpayment. This isn’t a viable option if you don’t have the cash.
5. Understand Your Credit Score
Your credit score is how lenders base much of their decisions about your loan amounts and rates. It is a reflection of their confidence in your ability to repay them. Learn how to improve your score if it is lower because the higher your credit score, the easier your mortgage process will be.
6. Choose Your Financing Type
Review the types of financing available to determine which is best for your financial situation. There are conventional, government-backed, adjustable rates, fixed rates, 15-year and 30-year mortgages. A fixed-rate mortgage will provide you more security, and your principal & interest rates won’t change, while an adjustable-rate mortgage can fluctuate over the life of the loan.
7. Downpayment
The larger the down payment, the more options you have. Zero downpayment options are waning. The larger the downpayment, the more favorable your rates and terms are, and the lower your monthly payment.
8. Check Prepayment Penalties
It isn’t unusual for borrowers to make an extra monthly payment or pay extra on their principal when they have a cash windfall. Some mortgages may have language in their terms that penalizes you for early payoffs.
9. Target Your Application Approach
Your approach to mortgage applications should be targeted, not a shotgun approach. A lender’s hard inquiry on your application can show up on your credit report and temporarily lower your credit score. Applying with several different lenders in a two-week period only counts as one inquiry. If you drag it out over a more extended period, you can damage your score, which may result in a higher rate.
10. Timing
If you must wait, remember that not now doesn’t mean never. Preparing for the mortgage process may take time to get everything in order. Taking your time is far better than getting in over your head.
Now that you know how to prepare for the mortgage process, get your credit report and review it periodically. Create a plan that will get you to home ownership.
When you are ready to buy, I am prepared to help you find your ideal home in the Palm Springs area. Contact me, Stephen Burchard, The Desert Bowtie Realtor®, taking the (k)nots out of real estate.
