Have you thought about buying a house, but deemed it elusive because of the interest rates? While a home is a wise investment, the process that comes with securing a mortgage is a challenging task, especially if you are unprepared. One thing you need to make sure is to get a mortgage with reasonable terms unless you are okay with paying more every month. Your income and credit history will play a vital role in applying for a mortgage.
Essential Questions To Ask Before Applying For A Mortgage
1. What are the mortgage requirements?
Before you could secure a mortgage, you will be asked to prepare documents, which will determine your ability to pay back the money owed. Some of the documents you will be required to submit are three months of bank account statements, tax filings, pay stubs and much more. Be sure to keep things organized by creating an application checklist.
2. How much can you spend?
The lender determines loanable amount based on your income. So if you have existing loans, they will also be taken into consideration when calculating your borrowing limits. You might want to slow down on your expenditures, so you do not get overwhelmed with your debt payments.
3. What is the type of home you are planning to buy?
When exploring options, do not take the market you are purchasing in for granted because it will also play a crucial role in the application process. If you are in Florida, lenders may have stricter standards on the type of property you are going to buy. For instance, projects that have gone bankrupt like condominiums may have rigid rules as compared to other types of properties. The rules will vary from state to state. You will need to seek advice from a real estate professional to gain a deeper understanding of the lending standards.
4. Do you have problems with your credit score?
Your credit score will be one of the factors that will determine whether or not the lender will approve your loan application. Get a detailed report of your credit score, so you will know if you qualify. If you have already obtained a report on your credit score, review it and make sure that there are no mistakes. If you need to raise your credit score, you can start by paying off your balance. Avoid taking new loans or opening new accounts, especially if they require a credit check.
5. Do you have debts?
Lenders are very particular about the loans you have taken. More often than not, lenders advice to not exceed the margin, which is around 36% of your gross income. You can reduce the ratio by paying off your car loans, credit card debts, and other outstanding loans. Although you can save money when paying off a car loan, it can have a positive effect on your financial health.
6. Can you manage your finances?
Once the lender approves your loan, they have the right to monitor your finances to make sure that you are going to spend the money for investing in a new home. While buying new furniture may be an option, you should only do it once you own the house. Avoid sabotaging your loan by managing your finances wisely after getting a pre-approval.
7. Are your taxes in order?
Lenders will also check if you are a good taxpayer. They will check your federal taxes to find out about your status. Be sure to file your taxes for the current year, and check your documents if it matches with the ones you sent to the Internal Revenue Service (IRS).
These questions will give you a better view of your financial standing. If you are eager to buy a home, make it a habit to keep your cash purchases and credit score in check.
Not sure how to secure a mortgage? Let us help you put things in proper perspective.
Cape Coral Mortgage, Inc.
3512 Del Prado Blvd. S Ste106
Cape Coral, Fl. 33904
(239) 540 5555