If you’re considering getting a mortgage, you need to plan ahead. There are many things that you can do now to help you get a better interest rate and lower closing costs. Some of these things are very simple to incorporate, while others will take a little longer to do. The following is a list of the things you should do to get the best mortgage possible. This list is broken down in to two parts: “simple” and “takes time”
Simple
- Getting a copy of your credit report: You are entitled to review your credit report once per year for free. There are many sites online that offer free credit reports. Once you have the report look over it to make sure there are no errors. If you do find errors, you will have time to get them taken off. Please see my post on credit repair.
-Saving money: You might think that you have enough for the down payment and closing costs, unfortunately, lenders often will look for additional funds available to you after payment for all the costs associated with buying a home, this is call “reserves” . And frequently, they will require that these funds be “seasoned” ( in your account for 2 months), so it is best to plan ahead and start saving.
-Do not put anything on credit: If you’re considering paying for anything no matter how big or small the amount might be, don’t. The reason for this is a minor charge on your credit card will be report to the credit agencies and this can lower your credit scores.
-Do not change jobs in a different industry. In one of my posts, I mentioned that you can change jobs as long as it is in the same industry as you’re in now. The lender wants to give money to people that they deemed stable, one of these factors of stability is being in either the same job or industry for 2 years.
-Get a part-time job in the same industry: As long as your second job is in the same line of work as your full-time job, you will be able to use that income in addition to your full-time income to qualify.
-Keep all of your documents: Save all of your cancel checks, bank statements, 401k statement, etc. Any thing that will help paint a pretty financial picture of you may be needed. This is especially true for people applying for an FHA with no credit scores or limited trade lines. Lenders can and will use these “alternative credit references” to approve your mortgage.
-Start learning about mortgages: This will pay off in your ability to negotiate with your loan officer and save you a bit of money. (You are in the right place)
-Remember to shop around: You should apply to at least 3 mortgage companies. This will help you compare and save money. Also, every mortgage office has a special relationship with a particular lender, so if you get a denial from one office, you might get an approval from another.
-Look for reviews online of your lender: There might be some mortgage brokers or lenders that have done an exceptional job for their clients that they’re talked about online. Other hand, there might be lenders and mortgage brokers that have used bait and switch marketing or done other things that resulted in a negative review of them. This will help narrow the list of mortgage offices to contact.
- Build some credit lines ( for people that have no credit or little credit). I know I mentioned above not to add any credit, but if you can wait 6 months or longer to get a mortgage read this. Go to your local credit union or bank that does “secured saving loans”, make sure they report to the credit rating agencies, and apply for a secured loan. You will be required to deposit at least the amount that you are borrowing with them and they will in turn give you a loan for up to that amount. Yes, it sounds silly.
Why do you give them money and a minute later they loan it back to you? The reason they are giving you a loan within minutes is they have nothing to lose. If you default on the loan, they keep your money, which is frozen until you pay off the loan. Essentially you’re borrowing your money to the bank to have the bank borrow the money to you in exchange for a good mark on your credit report. (There’s a special page on this)
If you did everything in this list, I can assure you that you will be able to qualify for the best mortgage with the lowest rate and closing cost. If it is not possible for you to complete some of the items listed, you might still be able to qualify for a mortgage, but it will be one with a higher rate and/or higher closing cost.
I hope this will help you. As always comments are welcome.
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