We have all wanted to have a house of our own, and when we find the one we are dreaming of, we hope that we have enough resources to be able to acquire it. That is why we need to make ample preparation even before we apply for a mortgage.
A mortgage is a long-term commitment, depending on the term you choose. That said, the determining factors of whether you can be approved of a mortgage loan in major cities like Utah or Houston also depend on your long-term reputation and image.
Experts have given a list of smart financial moves to make before applying for a mortgage.
Prepare the Necessary Documents
Any financial move will have its own barrage of documentary requirements. Be ready to prepare a combination of these documents, as most lenders would like to see these standard documents as the basis for their evaluation of you. These include one month of recent pay stubs from the buyers or co-makers who are listed on the loan, and also two years of tax filings, specifically the most recent.
Aside from these, you need the last three months of your bank account statements. If they find any large deposits or withdrawals, they will ask you for an explanation of those, and that includes any supporting documents.
Take Steps to Improve Your Credit Score
So much of your mortgage depends on your credit score and there are many ways to increase this. One way is to hold out on any financing offers. These would include auto loans and personal loans. The credit score deals with your financial flexibility and any loan or financing arrangement will compromise your chances.
Pay all your purchases with cash as much as possible. Credit cards are an important convenience, but any charges that are left unpaid can adversely affect your credit score. You need to resist the temptation of splurging on discount sales and various offers that credit card companies throw at you. If you have any outstanding debt or installment plan, pay them off as soon as possible. It’s best to keep a clean slate when you apply for a mortgage.
For all the bills that are also reflected on your credit report, like those on a debit arrangement, you need to be sure that they are settled and paid on time. For other bills that can also be part of a background check, it also needs to be paid since missing one payment could place you at a disadvantage or even have you rejected.
Hold On to Your Cash
You need to have savings on your bank account, but also have your cash ready. Skip your vacation or shopping spree as you need money for your down payment and closing costs. You may need to pull out from your reserves and we are only talking about the loan requirements. There would be other costs such as furnishings, moving expenses, and other details and you would need cash to address that.
Hold On to Your Job
Credit evaluation rests on stability. With this in mind, it is better to stay at your job and hold off any transfers or resignations, at least until your loan has been approved. Unless you have an offer for a promotion in a different company, this is best as a rule of thumb. Keep your job and be patient with the process.
A mortgage loan can help make your dreams come true, but if you do not manage it well, you may end up in the pits of high interest rates and bad debts.