If you are planning on financing a home in the near future- you won’t want to miss this! From credit tips to loan requirements, we’ve put together the ultimate guide to “What You Should Know about Financing a Home” so you can better prepare for the future!
1: Credit, Credit, Credit:
We can’t emphasize it enough. Your credit score is a major factor in the home loan programs you qualify for. The first thing you want to do is identify any errors on your credit report. Nearly every consumer has an error reporting from one of the major credit bureaus. Clearing up errors can take some time so you want to be sure you have taken care of this beforehand so it is not a delaying factor in obtaining home financing. A Shore Mortgage Loan Officer can order a credit report and review it with you to make sure there isn’t anything on your credit report that you are not aware of. Regardless of your credit history, the most important thing is to build and maintain an excellent credit portfolio moving forward.
2. Calculate your Debt to Income Ratio (DTI):
Lenders look closely at your income and total debt to determine how much you can afford to finance. Installment loans (car loans) do not count if you owe less than 9 payments. Revolving accounts (department stores) must actually be closed or the minimum payment will be used to calculate your DTI even if you have a 0 balance. Lenders don’t like to see a lot of revolving accounts. Our Minimum Income Calculator can give you a general idea of how much income you need to secure a loan.
3. Down Payment Funds:
The money used for your down payment and closing costs typically have to come from a documented savings or checking account and require a 60 day seasoning period. So if you haven’t started saving for a down payment yet, now is the time. Down payments can range from 3% to 20% depending on which home financing programs you qualify for. A Shore Mortgage Loan Officer can provide you with a complimentary review to help determine much you can borrow, what type of monthly payment you can expect and how much you might need for a down payment.
4. Current Renters:
If you are renting a home or an apartment, it is important you have documentation of timely payments for at least 12 months. Paying by check is the best way to document your payments; money orders are not sufficient. The same applies to mortgage payments. If a lender miss-reports your payment history, cancelled checks are the only way to correct it.
5. Getting pre-approved:
When you’re ready to start house hunting, the first thing you want to do is to get pre-approved. This is a step further than a pre-qualification because you will now need to provide your loan officer with verification of your credit, income, assets and liabilities. Based on your immediate portfolio, the best home financing solution for you will be presented. The more information you can provide your loan officer with upfront, the smoother and faster the process will go. Here are a few important pieces of required documentation:
- Last 2 years Tax Returns, W2’s
- Last 2 Months Bank Statements
- Asset Statements (401K, Stocks, or Bonds)
- Copy of Drivers License & Social Security Card
- Current Pay Stub
To learn more about financing a home, loan requirements, or how to apply for a loan, call a Shore Mortgage Loan Officer today at 855-SHORE-55!
Ready to get started? Apply online now!
