Creating a Mortgage Checklist for the Home Buying Season
Buying a home, whether it is your first or your third, is almost always a stressful experience. But you can save time and energy and alleviate a lot of the stress just by being organized and prepared. Making sure you have everything you need on your mortgage checklist will also help ensure that you are ready to make a deal immediately, so you don’t miss out on the home of your dreams in what will surely be a scorching hot buying season this spring.
Ready to get prepared? Here’s how to get your mortgage checklist in order.
Start Saving!
Unless you are applying for a VA loan, you are going to want to have at least 10 percent of the home’s price saved up for a down payment. Or, if you want to avoid paying private mortgage insurance (PMI) every month, then you’ll have to make it 20 percent. Before getting too involved in the mortgage process, make sure you are saving as much as you need to get into the type of home you want in the area you want to live in.
Establish Your Budget
You can’t really have an idea of how much home you can afford if you don’t know your budget. So, creating a budget is one of the most important things you need to do early on. When tallying up the numbers, be disciplined and strict with your incoming and outgoing finances and make sure you don’t forget any important monthly expenses. The last thing you want to do is get into a home that you can afford on paper, but not in reality.
Check Your Credit
There are a lot of factors that go into being approved for a home loan and the rate you get approved for, but one of the biggest items remains your credit. For every point your credit score is under the lofty goal of 800, the higher your interest rate is going to be. So, before you start shopping for a home, grab copies of your credit reports from the three main reporting bureaus and go over them with a fine-toothed comb. Look for any discrepancies and get them removed if you find any. Keep working on improving your credit and aim for at least a score of 700. While you can still get approved with a lower score, being above 700 will help ensure you get to work with the most competitive rates.
Get Your Documents Together
While you can get pre-qualified for a home mortgage by simply making a phone call to a lender and giving the most basic of information, getting pre-approved is a much more rigorous process that involves a much deeper review. For a pre-approval, your lender will need to see a variety of personal and financial documents. Having them collected and ready for your lender will help save time and get your home loan pre-approved quicker. Here’s what you will need to get together:
- Basic information about each borrower
- Basic information about the type of home you want to purchase
- Mortgage application
- Proof of funds for the down payment and closing costs
- Monthly income and expenses
- Government-issued identification for all borrowers
- Income verification documents (i.e., 2-years’ worth of W-2s, pay stubs, tax returns, alimony/child support documents, profit-and-loss statements, etc.)
- Bank statements
- List of liabilities and assets
- Two to three months’ worth of statements for all credit card accounts, student loans, etc.
- Retirement / investment account statements
- Gift letter (if using gift money for the down payment)
- Proof of rent payments (if applicable)
- Copy of divorce decree (if applicable)
- Bankruptcy discharge or foreclosure documents
- Proof of permanent residency / immigration status (for non-citizens)
Get Pre-Approved, THEN Start House Shopping
So many people start shopping for a home and then get pre-approved for a mortgage, but this isn’t necessarily the best way to go about it. You really shouldn’t start your house hunt until after you have your loan lined up. Why? Because it won’t take long for you to find a house that you’ll fall in love with, and you want to be able to act quickly to make sure you get it.
By being prepared and having everything in your checklist marked off, you’ll not only improve your odds of getting the home you want, but you’ll also know you can afford it.
