Mortgage guidelines for new homeowners
A mortgage application can be a difficult task. But following a few simple tips can help save you much hassle as a new homeowner. As a first-timer, the process of buying a house is a daunting task.
Keep credit score in mind and how it affects your mortgage
Credit scores make a huge difference in evaluating what kind of house is affordable for you. With a high credit score, you can automatically receive a better discount on the mortgage. Thus, before you dive head-on into the house buying process, it’s always a better idea to keep a check on your credit ratings. Next, implement a few ways to give a boost to your credit ratings.
Keep an estimate of your borrowing limit
Lenders use two different types of debt ratios to determine your borrowing limit. The first one involves your housing payment of a month with the inclusion of your taxes and insurance, as you can use a mortgage calculator for your payment estimation.
The second one involves the mortgage payment along with your debt. Between the two types of ratios, the lender will apply what gives a lower payment. Often other lenders can have generous and better qualification ratios, but the basic ones traditionally involve these.
Don’t spread yourself too thin
Suppose you take an example of credit cards. If you set your limit at a certain amount, it does not necessarily apply that you must spend the limit. Similar to that logic, when you consider mortgages, you do not have to extend your budget simply because you are qualified for a set amount of mortgage. Make sure that your mortgage payment fits your bank standards as well as your budget.
Have your documents ready
You will require certain documents that may include income, current employment, identification proof, and a few more for your mortgage application process. It is always better to collect the necessary documents before you begin the application process and visit a lender.
For starters, you can include documents like:
- Current tax returns
- Bank statements as well as brokerage statements
- Paycheck stubs
- Driver’s license
- Marriage license (if required)
- Contact numbers of your office’s HR department
Obtain mortgage pre-approval ahead of your house shopping
You do not necessarily need mortgage pre-approval to look at houses. However, getting a pre-approval can prove to be incredibly beneficial as a house buying tool. By submitting the pre-approval letter with the offer on the house, you are telling the seller that you are serious. The pre-approval mortgage letter presents a front that you would not bring in trouble while considering finances.
Closing costs need not be a part of overhead expenses
In general, you can assume closing costs to be approximately 2 to 3 percent of the principal amount of mortgage. However, it is ultimately allowed for you to include closing costs paid while giving an offer. It is a brilliant strategy to implement for new homeowners who have limited savings. It can help reduce your overhead expenses. Further, it also improves the chances of getting a mortgage.
Before starting your mortgage application process, you can find out more about Prime mortgage.