What You Need to Get Your First Mortgage
Getting ready to buy your first home is one of the most exciting, and most nerve-wracking, experiences of your life.
If you are like most first-time homeowners, you will also need a mortgage to help you pay for your home. Many people are intimidated by the idea of having to meet with a banker to discuss their mortgage options. However, as long as you are prepared getting your first mortgage will be easier than you imagine.
Understand Your Mortgage Eligibility
One of the biggest mistakes people make is to look for a house before they shop for a mortgage. This can lead to big problems. You may later find out that you cannot afford the house you have already fallen in love with and made an offer on.
Before you start looking at houses, you need to talk with a qualified mortgage officer or broker to find out what kind of mortgage options you qualify for. When considering your mortgage options you will want to focus on:
- The interest rate you qualify for
- What type of down payment you are expected to make
- How big of a loan do you qualify for
- How big of a loan will you need
- How much will mortgage insurance add to your payments
- How much will your monthly payments be
- What is the length of the mortgage
What Your Mortgage Lender Wants to Know
When mortgage lenders are evaluating potential borrowers they are primarily looking at:
- Your credit history
- Your credit score
- Your ability to make the monthly payments
- How much of a down payment you will be making
Once you know what your lender is looking for you can make sure you are prepared. You will want to order your credit reports before applying for a loan. Often, credit reports have errors on them. You will want to make sure that any errors are resolved so that you don’t get rejected for a credit issue that isn’t your fault.
You may also discover that you need to do some credit repair. You will want to pay off as much debt as possible before asking for a mortgage.
Mortgage lenders will also want to see that you have a solid work history. If you have a history of stable employment you are more likely to get good terms on a mortgage than if you just started a new job last week.
The lender will also want to know how big of a down payment you will be making. While the rule of thumb is you should make a 20% down payment, the truth is every situation is different. The better your credit is, the better your debt to income ratio is, and the more reliable your income is, the lower your down payment will need to be.
Documents You Will Need
When meeting with a mortgage broker you need to be prepared to document everything. The days of stated income loans are long gone. You will want to bring:
- Credit reports
- Tax returns
- Paycheck stubs for the past three months
- Bank statements
Once you have gone through the mortgage process and have a pre-approval, you can shop for a home with confidence. You will know exactly what you can afford and how much it will cost you a month.
You will be able to enjoy the entire home buying process.