3 Things to Do Before Applying for a Home Loan

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For many first-time home buyers, the road map to homeownership has many unexpected turns.  Before committing to hiring a realtor to find your dream home, make sure these steps have been taken to reassure financial stability throughout the home buying process.

 

 number 1  Check Your Credit Score

Credit scores are one of the first items a lender will consider when an individual or partners submit a home loan application.  Before speaking with a lender, it’s important to know what they’ll be reviewing. 

 

  • Timely payments
  • If there are current delinquencies-6 month timeframe
  • Debt-to-income ratio
  • FICO credit score

 

Learn more about your credit score and receive your free annual credit report.

 

number 2  Know Your Monthly Income and Debts

Write down all income sources and any debts that go out monthly.  If your debt to income ratio is more than 43%, it can be considered “risky borrowing” depending on the type of debt.

 

To better understand how much purchasing a home could change the income vs. debt scale, look at any rental and/or transportation current costs.  Moving closer to work may cut down on transportation costs, allowing for some room in what you’re willing to spend on a home.

 

Not sure what the reasonable monthly mortgage payment should be in your state?  HUD guidelines state that mortgage payments should not exceed more than 28% of your pre-taxed income.  This creates a standard for fair market pricing based on a family’s median income.

 

Take advantage of our purchase calculators to see how much you can afford and if you pre-qualify.

 

 number 3  Save for the Down Payment and Closing Costs

There are a lot of different expenses that a first-time home buyer will experience.  The two most common are the down payment and closing costs.  Programs are available to as little as 3% down on home loans.

 

Down Payment:  Money given to the home’s seller, expressed in percentages, to ensure a financial interest in the home. 

 

Closing Costs:  Fees and expenses that are paid to the companies and individuals involved that assist in securing the mortgage.  This can include:

  • Lender's origination fee
  • Deposit verification fees
  • Attorney's fees
  • The appraisal fee and any inspection fees
  • Cost of title insurance and title examination
  • Property survey
  • Credit reports (actual costs)
  • Transfer stamps, recording fees, and taxes

Are You Ready to Own a Home?  Take our quiz.

Be Prepared for the House Hunting Experience

Questions about homeownership?  Our mortgage loan officers are here for you. 

Want to learn more about first-time home-buying?  Attend one of our free homeownership seminars


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