Congratulations, now that you have increased your credit score, it is time to shop for a mortgage lender. A mortgage lender is the person that will assist you with obtaining a loan to buy a home. Understanding the features and requirements of each major mortgage program can help you figure out which one is right for your situation.
Which mortgage is right for you?
Compare rates from multiple mortgage lenders
Speak with a mortgage lender to determine if they offer the types of loans you want and/or have a loan product that fits your needs and wants. Also, discuss the rate(s) they are offering on the loans and keep in mind that the rate quote you see is an estimate. A lender will have to pull your credit information and process a loan application to provide an accurate rate. However, the actual rate can not be locked in until you find a home.
Once you have received information from various lenders, narrow the list by considering the following:
Get a Pre-Approval
A pre-approval is a letter from a mortgage lender that shows how much you’re qualified to borrow. This can help you set a home buying budget and strengthen your purchase offer when you find a home you want to buy. To get pre-approved, you’ll have to provide information about your income, debts and assets. Lenders typically require:
The Hennigan Realty Group has multiple preferred lenders that offer various mortgage products and they work with down payment assistance programs. Give us a call at 832-305-5903 or 623-4MYHOME for more information regarding our preferred lender referral partners.
Congratulations!! Your credit is improving and you are getting closer to achieving your financial and real estate goals. Here are some additional tips to consider.
1. Racking up Debt
Taking on additional debt before applying for a mortgage doesn’t make much sense. Your debt-to-income ratio – or how much debt you’re paying off each month in comparison to how much money you’re making – is just one factor that lenders look at when reviewing your mortgage application. If it’s above a certain threshold (typically 43%), you’ll be considered a risky borrower.
2. Making a Major Purchase. Buying something big like new appliances or a new car could lead a lender to reject your mortgage application. You’ll need to have cash on hand when you’re buying a house so that you can pay your earnest money, closing costs, etc. Once more, if you have to take out a loan or swipe a credit card to make that purchase, that could affect your credit score if you can’t pay the bill in full on time or your debt-to-credit ratio rises. If you’re tired of renting and you’re ready to buy a house, it’s best to try and reduce your financial obligations before applying for a mortgage.
3. Marrying Someone with Bad Credit
It’s not uncommon for couples to buy homes after tying the knot. Keep in mind, however, that if you plan on getting the house together, both of your credit scores and financial histories could be taken into account. If you’re marrying someone whose credit isn’t in tip top shape, it might be a good idea to work on improving his or her score (and paying off the wedding loan or extra debt you both took on) before trying to get a home loan.
4. Co-Signing on a Loan
It’s important to think carefully before agreeing to co-sign a loan for a child in college or another family member, particularly if you’re trying to become a homeowner. By co-signing, you become partially responsible for that debt. If the borrower can’t keep up with payments and defaults, your credit score could dip substantially. This is not to say you should not co-sign, but do think it through carefully.
5. Making Big Deposits. Your relatives can help you pay for your down payment, however there are rules related to down payment gifts. You can’t deposit the money into your account without properly documenting it. Generally, making a large deposit into your bank account prior to visiting a mortgage lender won’t look good. Lenders normally want to see that you have plenty of money in your account that’s been there for at least two months.
The Hennigan Realty Group blogs are a collective of information, experience, and expertise of the Hennigan Realty team. We have kept the information shared within the blogs general to provide foundational information that each person can build from. We are aware that everyone's real estate experience is unique and there is not a one-size fits all when it comes to buying or selling property. If you would like to gather more in-depth and specific requirements for your wants and needs, reach out to us directly.