Whether you’re a seasoned homeowner, or a first-time buyer, jumping into the sea of mortgage opportunity can seem daunting with endless possibilities. That’s where Future Home Loans steps in: we are a mortgage broker, meaning, we shop hundreds of the best rates possible to obtain the best options for you as a homeowner obtaining a mortgage. While our task is to get you the best rate possible, there are a number of things you can do prior to obtaining your new mortgage to help yourself and your future rate. We understand that buying a home is one of the most nerve wracking, but exciting moments of your life! Here are 4 of our top tips for a successful mortgage process.
- Check Your Credit
It goes without saying that your credit score and reports play a huge factor, if not the largest, in your interest rate for your new home’s mortgage. While there are many programs, including FHA Loans, that are available to potential buyers with lower scores, the higher you can get your score prior to locking in your new rate the better!
So how do you do this? First step, review your credit report. This includes information pulled from three major credit bureaus: Equifax, TransUnion, and Experian. The easiest way would be to contact one of our expert Mortgage Brokers. They will be able to pull your credit, offer mortgage industry advice, as well as get you on the right track with next steps (if needed!). After you’ve completed this, ensure there are no errors or fraud on your active accounts; if so, reach out to those companies to settle the issues before moving forward. You can also dispute these errors with the bureau that is reporting them. Other items to look for include: factual information, accounts currently in collections, late payments, and liens.
Next step? Raise that score. The credit reports pulled above will not list your current credit scores. Many credit card companies will provide you your FICO score for free; we also recommend utilizing Credit Karma, a free app for download on most mobile devices. After you’ve gotten your credit score, a good first step is to analyze. Most conventional lenders consider 640+ the minimum credit score to obtain a mortgage, however some government-backed loans will allow for scores as low as 500, provided you meet other criteria. The best thing to keep in mind: the higher the score, the better the rate and options available to you and your mortgage. One best way to raise your score will be to meet all debt payments in a timely manner, and in full. Payment history makes up for 35% of your credit score, and it is important to always meet those deadlines put in place to continue to assist on the journey of a better score. Another tip is to avoid making major purchases, or opening new lines of credit, a few months prior to when you plan to obtain your new mortgage. The reason behind this is those companies will inquire about your credit, and this can negatively affect your average length of credit history.
- What Can You Afford?
Before falling in love with your dream home, it’s important to note if you can afford it or not! That is where our pre-qualification step comes in. Our mortgage brokers will analyze your credit history, scores, etc. and determine an estimate for what you could afford based on those factors. It is also important to remember that your monthly mortgage payment is only one piece to the puzzle; you can also anticipate additional payments including property taxes, homeowners insurance, interest payments, and HOA Fees if applicable. Interested in a home on the water? We recommend checking the FEMA Flood Maps to see if that area is located in a flood zone. Often, flood insurance can be a requirement in these areas, and can increase the cost of monthly insurance payments by 1-3x! You will also need to determine what you can afford to pay for your down payments; typically, if you wish to avoid payments for private mortgage insurance, you will need to put down 20%. However, you can also put down as low as 3% of the home price.
- What Loan Option Is For You?
There are three main categories for home mortgages: Conventional, FHA, and VA Loans. What are the differences?
Conventional: These types of loans are funded by private banks, credit unions, or online lenders. They tend to have the strictest financial eligibility requirements, and higher down payments (but you do have the option of 3% down!).
FHA Loan: Do you not have a large amount available to you as a down payment, and still interested in a mortgage? FHA may be your best option! FHA Loans are government backed, offer more lenient credit-scenarios, and often allow for more leniency when it comes to credit scores and down payments (starting down payments at 3.5%). This type of loan (and VA) are still borrowed through private lenders, but funded via the federal government. This allows for less of a “risk” for the banks.
VA Loan: Are you a US Military Veteran, service member, or a military spouse? If so, you may qualify for a VA Loan. What makes a VA Loan stand out, is it being a zero down payment option. For many, that could be a savings of thousands of dollars in the immediate realm. VA Loans are also issued through private lenders, and are guaranteed by the US Department of Veterans Affairs.
- Compile The Paperwork
Once your financial outlook is in good shape, and you’re aware of how much you can afford, it is now time to compile the necessary paperwork to move forward. This includes documentation such as income verification, proof of assets, list of liabilities, and additional documentation. Once we review your credit scenarios, our helpful Loan originators will be able to compile a list of documents you need, potentially including your previous two-years tax returns, and if you’re self employed, you will be in need of 1099s or profit and loss statements from the past couple of years instead. Also, if you’re using gifted funds as a down payment, you’re required to supply a gift letter and a detailed paper trail of where exactly the money came from.
Ready to get started! Contact our team of Jacksonville beach mortgage experts today; they can assist with reviewing your credit scenarios, and compile the list of documents you will need to get started, as well as lend a helping hand with mortgage advice.