Check Your Credit Reports
Before you get too deep into the mortgage application process, its a good idea to take a step back and check your credit reports first. The health of your credit will play a big part in getting a good deal on a home loan, or even getting approved at all.
Start by pulling your credit reports from each of the three major credit bureaus: Experian, Equifax and TransUnion. The easiest way to do this is by visiting annualcreditreport.com, the only website thats authorized by federal law to provide free credit reports once per year.
Next, review your reports to ensure there are no errors or accounts that arent yours listed that may have damaged your credit. For example, review your personal information such as name, address and Social Security number for accuracy. Also check that the credit accounts and loans listed on your reports have been reported properly, including the balance and status. Double-check that there are no mysterious accounts opened, which would signal possible identity theft.
If you find an error, you can dispute it with the bureau thats reporting the incorrect information by visiting its website. Once you submit a dispute, the bureau is required to investigate and respond within 30 days.
Get In Top Financial Shape
Now that you’ve gathered your necessary paperwork, strive to improve your financial profile. For best results, Hammond suggests working with a lending officer. Additionally, the following tips could help:
- Hold off on changing jobs: Lenders look for job stability when they evaluate your ability to repay your loan. If you must switch jobs while applying for a mortgage, be sure that your new base salary qualifies you for the same loan amount. And keep in mind that only your base earnings count toward your income, until you can produce at least, two years bonus history.
- Avoid carrying excessive debt, student or other: Your debt-to-income ratio is an important factor that lenders consider when looking at your fitness for a loan. Reducing debt can make your finances look more attractive.
- Eliminate any unnecessary monthly expenses beyond housing: You can use the additional money to pay down debt or increase your down payment, both of which could put you in better shape when it comes to applying for a loan.
- If you need to build your credit history, try making frequent payments on a small credit card: “If you pay on time and consistently, your score should reflect that,” Hammond says.
Follow through on these core steps, and you’ll be well on your way to applying for your mortgageand getting your new home!
What To Bring To Your In
We want you to be ready for the pre-approval process and being prepared will help. For your meeting, you should plan to bring the following:
- Current address
- Previous address
- Current employment information
- Previous employment information
- If self-employed, the last 2 years Notice of Assessments from your Income Tax return
- Value of properties, automobiles, investments, and savings
- Most recent statements for mortgages, loans and lines of credit
- Most recent credit card statements
- Estimated value of your home
- Housing expenses
- Financial information for your co-borrower, if applicable
- Social Insurance Number
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Improve Your Credit Score
That brings us to the next step. Unless your credit is in perfect shape , youll want to spend some time getting it cleaned up.
Your credit reports dont contain your credit scores. Fortunately, its fairly easy to get your credit score for free. For example, many major credit card issuers provide your FICO score for free. Other websites allow you to see your VantageScore, though you should note this scoring model is used much less often than FICO by lenders and may differ from your FICO score by quite a few points.
When it comes to the credit score needed for a mortgage, most conventional lenders consider 620 to 640 to be the minimum. Some government-backed loans will allow you to borrow with a credit score as low as 500, provided you meet certain other criteria. However, the higher your score, the more affordable your loan will likely be.
One of the best ways to improve your credit score is to make all your debt payments on time and in full. Payment historythe most heavily weighted factoraccounts for 35% of your credit score. The amount of debt you owe in relation to the total amount of credit extended to you contributes to another 30% of your score, so its best to keep your debt as low as possible.
Finally, avoid making any major purchases on credit or open new lines of credit for a few months before you plan to apply for a mortgage, as this can negatively affect the average length of your credit history and the number of hard inquiries.
What Factors Are Considered For Pre
Lenders verify certain borrower information before providing a pre-approved offer. These include verification of employment, income, assets and credit score. A full credit report and credit score are pulled at the time of application vs. a limited credit report that is often used with pre-qualification offers.
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Make An Offer On A Home
Time estimate: A few weeks to a few months, depending on your market
Making an offer on the home you want to purchase is the next step and your pre-approval letter can help you get there. Include the letter in any offers you submit and give sellers confidence in your bids.
Tip:
Once your offer is accepted, youll sign your purchase and sale agreement, moving you one step closer to homeownership.
Test Drive Your Mortgage Chances
Once you’ve done all the steps above, your finances should be in great shape. To test this, a mortgage agreement in principle , offered by many lenders, is the acid test.
It’s a conditional offer saying you may be accepted, based on a quick check of your income and, probably, your credit file. However, it offers no guarantees and it’s not compulsory. But for first-time buyers especially, it boosts estate agents’ or sellers’ confidence that you’ll be able to complete the sale, so may up your chances of having an offer accepted. Some worried sellers might only accept viewings where you’ve had a mortgage AIP.
It’s worth benchmarking a top deal with our Mortgage Best Buys tool, and asking the lender to see if you pass the checks for their AIP. Don’t worry just as it doesn’t tie them in to lending to you, it doesn’t mean you have to borrow from that lender if you spot a better deal further down the line.
Beware too many of these checks in a short space of time could harm your credit rating if the lender does a credit check and marks it on your file. This could damage your mortgage application later on.
Some lenders offer a ‘soft’ search option, which won’t be visible to other lenders . Find out from the lender which it is before agreeing to one.
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Determine Your Down Payment
It helps to know how much you can provide as down payment before you start looking for a home. The size of your down payment may have an impact on the amount you get pre-approved for. Plus, down payments of less than 20% of the purchase price of a home require mortgage default insurance, whereas down payments that are 20% or above may not.
Proof Of Assets And Liabilities
Your lender might ask you for some or all of the following when they verify your assets:
- Up to 60 days worth of account statements that confirm the assets in your checking and savings accounts
- The most recent statement from your retirement or investment account
- Documents for the sale of any assets you got rid of before you applied, such as a copy of the title transfer if you sold a car
- Proof and verification of any gift funds deposited into your account within the last 2 months
Your lender may also ask you for supplemental information on any debts you owe, like a student loan or an auto loan. Cooperation with your lender only makes the process easier, so be sure to provide any requested information as soon as possible.
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Types Of Reverse Mortgages
- Federally Insured Reverse Mortgages – Known as Home Equity Conversion Mortgages
- Proprietary Reverse Mortgages
- Single Purpose Reverse Mortgages
When finding a lender remember:
- Be suspicious of anyone claiming that you can own a home with no down payment
- Seek out your own reverse mortgage counselor
- Never sign anything you do not fully understand
- Make sure the loan is federally insured
Apply For A Second Mortgage In Canada
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A second mortgage is typically taken out against a property that already has a loan against it, most often for the purpose of securing a large sum of money to either pay off debts or invest in something else. Youll often hear a second mortgage being referred to as a home equity loan the two terms are synonymous as a homes equity is used to secure a second mortgage.
Taking out a second mortgage means youll be taking on more debt, so its your best bet to make sure you completely understand all the risks and costs of a second mortgage before you sign on the dotted line.
Why take out a second mortgage?
There are many reasons why someone might want to take out a second mortgage it varies from case to case and person to person. Here are a few of the most common motivators for applying for a second mortgage:
- Refinancing your first mortgage to consolidate and pay off high interest debt
- For unexpected expenses that need to be handled right away
- Home improvements or renovations
- To repay unsettled accounts that are in collections
- If an opportunity to invest in something or to make money presents itself
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Where Can You Apply For An Fha Loan
Most banks and other mortgage lenders offer FHA loans. However, their lending standards, and the fees and rates they charge, can vary significantly from lender to lender, so it’s important to shop around and compare rates and terms that lenders will offer you. One way to do that is by using the from at the top of this page to request free rate quotes from several lenders at once.
Once you choose a lender, there are two ways you can apply for an FHA loan. You can go to the bank itself, obtain the necessary application forms, fill them out either there or at home, then submit them to your loan officer for review.
However, many lenders now allow you to apply for an FHA loan online as well. You log into a special section of the lender’s web site where you can complete the necessary forms, scan or otherwise obtain electronic copies of the documentation required, and submit the whole thing electronically. Your loan officer can then review your FHA loan application and let you know if other information is needed, which you can conveniently submit from home.
Keep in mind that an FHA loan doesn’t issue the loan itself, but ensures lenders are in line with the generous rates and that all the advantages are presented to the borrowers.
The Larger Your Down Payment The Wider Your Options
See number 4, its important to be realistic. So within a realistic framework of what you can afford, the more you put down, the better your terms. The days of zero down payments, especially on a mortgage, seem to be winding down. Putting more money down up front will help ensure you pay less each month.
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How To Prepare For Your Application
Before applying for a mortgage, contact the three main credit reference agencies and look at your credit reports. Make sure there is no incorrect information about you. You can do this online either through a paid subscription service or one of the free online services currently available.
You can check you credit score with one of the three main credit ratings agencies:
Close On Your New Home
Once youve been officially approved for a mortgage, youre nearing the finish line. All thats needed at that point is to complete the closing, which is when youll pay closing costs and receive the mortgage funds .
The closing process differs a bit from state to state, Ailion says. Mainly it involves confirming the seller has ownership and is authorized to transfer title, determining if there are other claims against the property that must be paid off, collecting the money from the buyer, and distributing it to the seller after deducting and paying other charges and fees.
The closing costs youre responsible for can include:
- Appraisal fee
- Origination and/or underwriting fee
- Title services fee
During your closing, the closing agent will provide a detailed statement to the parties of where the money came from and went. The agent will also enter the transaction into the public record and deliver the deed to the buyer.
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Apply With Different Lenders
Different mortgage lenders set their own rates based on the factors mentioned above — credit score, debt-to-income ratio, earnings, and funds available for a down payment. That’s why it’s a good idea to fill out more than one mortgage application. The more offers you get, the easier it’ll be to compare your choices and come away with the best deal on a home loan.
That said, it’s a good idea to shop around for a mortgage loan within the same 14-day period. Whenever a lender pulls your credit report, it counts as a hard inquiry on your record. Too many hard inquiries could hurt your credit score, but if you apply for multiple mortgages within 14 days, all of those applications will count as a single inquiry.
How Do Lenders Check I Can Afford A Mortgage
Lenders will work out your household income including your basic salary and any other income you receive from a second job, freelancing, benefits, commission or bonuses.
Checking affordability is a much more detailed process. Lenders take all your regular household bills and spending into account, along with any debts such as loans and credit cards, to make sure you have enough left to cover the monthly mortgage repayments.
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How Do I Apply For A Mortgage License
A mortgage license is required for the following license types: Mortgage Broker/Processor License/Registration, Mortgage Lender License/Registration, and Mortgage Loan Originator License. Any additional Georgia office location outside of the brokers or lenders main office does not require a separate license, but it does require branch approval. Branches fall under the companys license.
APPLICATION and REQUIREMENTS
All mortgage license applications must be made through the Nationwide Mortgage Licensing System & Registry . Click HERE to access NMLS.
Click HERE to access the GA Mortgage License Requirements Checklists in NMLS for more details on the license requirements and what activities can be conducted under each license type.
Sort Your Paperwork To Speed Things Up
Lenders need proof of your income before they can offer mortgages, so it makes sense to get your paperwork together in advance. Sending all the paperwork in one batch speeds up the process as it reduces the chances of your application being reviewed by more people.
If your lender won’t accept PDFs, uploads or printed internet bank statements, you may need your bank to send you original copies. Ask for these a few weeks in advance in case you need to wait for the originals to arrive.
Your lender may want to see any or all of:
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I’m Employed And My Latest Payslip Includes Government Income Support
Your affordability for your application will be based on the hours you worked, as evidenced in your latest payslip. We will not include any furlough or job support income in your application.
Well assess what you can afford by reviewing your latest payslip and the hours youve worked. We will not include any furlough or job support income in your application.
If your working hours have recently changed, your payslip will need to evidence this. Well then include any additional worked hours in our assessment.
For joint applications, well assess the payslips of both applicants to work out your
combined income.
If youre applying online:
Youll need to calculate your gross annual income based on the hours worked in your payslip. As there are 52 weeks in a year:
- for monthly payslips, 12 times the earned amount from hours worked
- for four weekly payslips, 13 times the earned amount from hours worked
- for bi-weekly payslips, 26 times the earned amount from hours worked
- for weekly payslips, 52 times the earned amount from hours worked
Know What You Can Afford
Its fun to fantasize about a dream home with every imaginable bell and whistle, but you should really only purchase what you can reasonably afford.
Most analysts believe you should not spend more than 30 percent of your gross monthly income on home-related costs, says Katsiaryna Bardos, associate professor of finance at Fairfield University in Fairfield, Connecticut.
Bardos says one way to determine how much you can afford is to calculate your debt-to-income ratio . This is determined by summing up all of your monthly debt payments and dividing that by your gross monthly income.
Fannie Mae and Freddie Mac loans accept a maximum DTI ratio of 45 percent. If your ratio is higher than that, you might want to wait to buy a house until you reduce your debt, Bardos suggests.
Andrea Woroch, a Bakersfield, California-based finance expert, says its essential to take into account all your monthly expenses including food, healthcare and medical costs, childcare, transportation, vacation and entertainment expenses and other savings goals.
The last thing you want to do is get locked into a mortgage payment that limits your lifestyle flexibility and keeps you from accomplishing your goals, Woroch says.
You can determine what you can afford by using Bankrates calculator, which factors in your income, monthly obligations, estimated down payment, the details of your mortgage like the interest rate, and homeowners insurance and property taxes.
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