Many people would like to own a house, but the cost is out of reach. The popular option is to apply for Jumbo loans or a mortgage. Homeowners must meet strict credit requirements to qualify for these loans. In addition, there are many other factors to consider before applying.
Existing debt can negatively affect your mortgage application. The first step would be to sort out all existing loans before submitting your application. Clearing all debts will also improve your credit score, and you might get better rates from your lender. Ensure your credit report is in order because that’s where your lender will first refer when assessing your creditworthiness.
Interest rate is a big concern when applying for Jumbo loans or a mortgage. Are Jumbo rates higher or lower? This is the typical question the borrower will ask, which is vital in determining the best financing option for a home buyer. Jumbo mortgage rates are competitive and thus may be lower than mortgage rates. Most homeowners prefer a longer repayment period and smaller installment amounts. This makes the 30-year Jumbo mortgage interest rates favorable. However, a 15-year fixed Jumbo loan has a lower cost in the long run despite high monthly payments. A $0 down jumbo mortgage is also ideal because it does not require a down payment.
Many are eagerly awaiting the day when they’re able to become a homeowner. That being said, many of these buyers will be qualifying for mortgage loans for the first time. In fact, statistics gathered from the 2016 National Association of Realtors Profile of Home Buyer and Sellers found that nearly 35% of those purchasing a home were first time buyers. With that in mind, it’s advisable to do a few things while you’re waiting to obtain a mortgage loan. Considering that, here are four helpful tips to follow before filling out a mortgage application.
Be Prepared to Present Financial Information
In the early stages of applying for a mortgage, you’ll often be required to present various financial information. This takes place in order for a bank to find out if you’re able to obtain a mortgage. In addition, bank professionals often utilize mortgage calculators to find you the best possible options.
You’ll commonly need to have past tax forms, bank statements, and pay stubs. In many cases, you’ll need to have at least tax forms for the past two years, bank statements for the past two months, and two recent pay stubs. If you’re paid weekly, you might need to wait until these accumulate to a full month of pay. It’s beneficial to show the bank that your financial history is stable. Therefore, you might need to present receipts or some other type of documentation concerning large debits or credits to your accounts.
Your Credit Score is an Important Factor
While applying for a mortgage, banks will want to know about your credit status. This information is obtained by finding your credit score. If you’re unsure of what your current credit score is, you’ll want to obtain this information. In the event that your credit score is lower than it needs to be, there are actions you can take to remedy this situation. First, try and pay off any credit cards or debts where the amounts are smaller. Paying off smaller debts completely is likely to be a more obtainable goal than tackling a card with a higher amount of debt.
Having a higher credit score might allow you to obtain an FHA loan. In fact, statistics gathered from the 2017 NAR Home Buyer and Seller Generational Trends Report found that 24% of those surveyed utilized an FHA loan to purchase their respective homes. An FHA loan is often valuable for those who are unable to make down payment requirements or have lower credit.
Avoid Purchases Where Credit Checks are Required
After you obtain a loan, your finances will still be monitored. Considering that, certain buyers make a crucial mistake after obtaining their loan. This mistake is purchasing anything requiring a credit check before or immediately after a loan is finalized. Lenders don’t want to give someone a loan and have that person immediately start taking on more debt.
Have a Professional on Your Side
It’s understandable to feel confused during this process. In fact, statistics gathered in 2016 found that 59% of those who owned a home wished they had a better understanding of their mortgage. Considering that, consider visiting a mortgage company. In turn, these professionals can utilize mortgage calculators and their knowledge in order to help you find the best possible rates. Mortgage calculators can become quite complicated, especially for those financing a home for the first time. Having a professional help with calculating mortgage rates can be extremely helpful, especially for first time buyers.
To summarize, there are several tips to follow before applying for a mortgage. In turn, this helps to ensure that you’re able to begin qualifying for a new home. Many potential buyers visit mortgage professional in order to find options for purchasing a home. Mortgage calculators and other tools are utilized by these professionals in order to help you find the home of your dreams. Following the previously mentioned tips can help ensure any possible barriers to obtaining a mortgage are taken care of.