Mortgage Application Preparation: What to Know
Getting ready to apply for a home mortgage application can be an exciting time. However, not everyone who is getting ready to apply knows what documentation is needed before and during the process. Here are three of the most important things every homeowner needs for proper mortgage application preparation.
Get Your Documents in Order
Before you even begin to fill out the application, make sure you have all the documentation necessary. This can include:
- W-2’s (Possibly spanning the last couple of years)
- Pay Stubs (Could be for the last two months)
- Signed Tax Returns (personal and business)
- Complete Bank Statements
The home lender will let you know of any additional documents you may need. It will also depend on the type of home mortgage you are applying for.
Monitor Your Credit Score
A good credit score will help you have one foot in the door when applying for a home mortgage. A great credit score will open the opportunity to choose from several loan options. Make sure to try and improve your score well in advance before applying for your home mortgage loan. Things that can help are:
- Reducing debt to income ratio
- Maintain consistent card payments
- Check for errors on card history
Banks and lenders will check for your debt-to-income ratio and see whether you can take on more debt than you have already. While student loans won’t automatically disqualify you from getting a loan, each month’s payment amount will be a factor in considering how much more debt you can take on. If you can reduce credit card debt before you begin your application, try doing that as well. That will help in making that ratio a bit smaller. Avoiding missing a payment will also show how responsible you are with your current debts, reflecting on you positively when application time comes around.
Also, monitor your credit score for any fraud or errors. Sometimes, unknown small transactions on credit card bills go unnoticed due to the little effect they have on the overall account. While the transaction may be small, this could indicate that someone has your information and could run larger amounts later on, damaging your credit score. Staying on top of these transactions will help keep your credit background clean when application time rolls around.
Prepare Your Finances
Not only will you have to get your paperwork and credit in order, but you are also going to need to create a budget and stick to it. No matter the loan option, you’re going to need a down payment on the home. This is where you will have to be realistic about your price range and how many years you will spend in the house. The higher the price of the home, the larger the down payment will be. The larger the down payment, the longer you are going to have to save up. Deciding on a realistic price range and creating a budget will help you avoid awkward conversations when the time comes to produce the down payment.
When you walk into a meeting to discuss home mortgage loans and options, you should be walking into that meeting full of confidence. These three tips will help you feel knowledgeable about your documentation, credit history, and finances. It will also make the loan application a lot smoother since you won’t have to be searching desperately for documents or fixing your credit score at the last moment. Want to know what the experts think on the matter? Ask us! We offer several loan options and can help you, no matter what situation you may be. We would also love to answer any questions you may have regarding the home mortgage application process.