Owning a home is a huge responsibility which shouldn’t be taken lightly. The first step is often to get approved for a mortgage, but there is a lot to learn before you dive right in. People who have taken mortgage in the past have contributed their knowledge to this article so you can learn how to avoid the mistakes they’ve made, so read on.
When you get a quote for a home mortgage, make sure that the paperwork does not mention anything about PMI insurance. Sometimes a mortgage requires that you get PMI insurance in order to get a lower rate. However, the cost of the insurance can offset the break you get in the rate. So look over this carefully.
If you are planning on purchasing a house, make sure your credit is in good standing. Most lenders want to make sure your credit history has been spotless for at least a year. To obtain the best rate, your credit score should be at least 720. Remember that the lower your score is, the harder the chances of getting approved.
Get a copy of your credit score before you apply for a mortgage. It is best to know where you stand before you complete an application for a mortgage. You should check your credit even if you are sure you have a good score since identity theft or mistakes can occur.
Get your documents in order ahead of applying for a new mortgage. These documents are going to be what lenders want when you’re trying to get your mortgage. They want to see W2s, bank statements, pay stubs as well as income tax returns. It will be an easier process if you have these documents together.
When considering the cost of your mortgage, also think about property taxes and homeowners insurance costs. Sometimes lenders will factor property taxes and insurance payments into your loan calculations but often they do not. You don’t want to be surprised when the tax office sends a bill and you learn the cost of required insurance.
Don’t make any sudden moves with your credit during your mortgage process. If your mortgage is approved, your credit needs to stay put until closing. After a lender pulls up your credit and says you’re approved, that doesn’t mean it’s a done deal. Many lenders will pull your credit again just before the loan closes. Avoid doing anything that could impact your credit. Don’t close accounts or apply for new credit lines. Be sure to pay your bills on time and don’t finance new cars.
Consider a mortgage broker instead of a bank, especially if you have less than perfect credit. Unlike banks, mortgage brokers have a variety of sources in which to get your loan approved. Additionally, many times mortgage brokers can get you a better interest rate than you can receive from a traditional bank.
Obtain a credit report. It is important to understand your credit rating before you begin any financial undertaking. Order reports from all 3 of the major credit reporting agencies. Compare them and look for any erroneous information that may appear. Once you have a good understanding of your ratings, you will know what to expect from lenders .
Know what the going interest rate is. This will help you know when to lock in an interest rate. Many mortgage companies offer to lock you into a particular interest rate for a period of 30 to 60 days. If the interest rates increase, you are protected. If they decline you can opt for the new interest rate.
If you’ve gotten approved for a mortgage, don’t make any other big purchases until after you’ve closed on your home. Typically your lender will pull your credit once again right before closing. If there are issues that crop up it could lead to problems with your closing. Be smart and curb spending until all is complete.
When you’re trying to work with a mortgage broker that wants to see your credit report, it’s better to have a lot of different accounts with low balances than to have large balances on a couple of credit cards. Try to have balances that are lower than 50 percent of the credit limit you’re working with. It’s a good idea to use less than 30 percent of the available credit on each account.
Mortgage rates change frequently, so familiarize yourself with the current rates. You will also want to know what the mortgage rates have been in the recent past. If mortgage rates are rising, you may want to get a loan now rather than later. If the rates are falling, you may decide to wait another month or so before getting your loan.
After you have your mortgage, try to pay down the principal as much as possible. This helps you pay the mortgage off faster. For instance, you can decrease your loan’s term by about ten years just by paying 100 dollars more each month.
Be honest with everything in your loan process. If you are less than truthful, it could come back to haunt you. Why would a lender trust you with a large sum of money when they can’t trust your word?
Make sure your credit report looks good before applying for a loan. Good credit is a must. They need to know that you are able to pay them back. Before you apply for a loan, assure your credit looks good.
Remember that interest rates are currently very low, and that means they can only go up from here. How would that impact your finances? Would you be able to afford them if they went up? If not, consider how large a mortgage you could afford in that situation instead.
Now that you’ve read about the truth when it comes to getting a mortgage, you will avoid the hurdles which tripped up your peers in the past. Their struggles will make your mortgage application process smooth sailing. Be sure to use these tips, otherwise you will face the same perils they did.