As the housing market continues to spit out more positive statistics, many consumers are encouraged to make the leap to becoming homeowners in 2013 — but they will also need to ensure they are fully prepared to go through the mortgage application process.
It will be necessary to pay attention to detail and provide your lender with all of the documentation and information necessary to increase your chances for approval. Preparing for a mortgage requires advanced preparation so here are some tips to keep in mind when you make the decision to pursue a mortgage.
Prep your credit, plump your savings
You are only ready to consider a mortgage if your credit is in shape. If you are carrying around bad credit, you not only risk paying higher mortgage rates you also risk not even qualifying for a mortgage.
Being financially secure and having a plan to repay your mortgage is the only way a lender is going to feel confident enough to lend you thousands of dollars.
In addition to a good credit history, you also need to have a sufficient amount of money to be used as a down payment on a home. Most lenders prefer a fund to cover 20% of the home’s total cost as a down payment. There are loan programs such as FHA loans that will allow a lower percentage for down payments but ideally you want to have a sufficient amount of funds to cover the down payment on the house plus all of the associated closing costs involved with a mortgage.
Scope out your ideal lender
There are a few options to consider when you are looking for a home loan. Banks are the traditional route that many consumers first consider because they have already established a relationship with their respective institution — sometimes there are perks for having a mortgage with your bank. Chase, for instance, will offer 1% cash back on automated mortgage payments that are deducted from the borrower’s Chase checking account.
Specialized home loan companies are also a popular choice for consumers to consider when they are looking outside their own bank.
Other resources for mortgages can be dangerous as some homeowners have discovered lately. There are still agencies that offer mortgage loans specifically marketed toward consumers with poor credit profiles. While not all of these agencies are predatory lenders, it is vital that perspective borrowers conduct their due diligence to ensure the business they deal with on a mortgage is on the up and up.