As we've been reflecting in recent blogs, mortgage rates have been falling lately. While it's far too early to know if this will be a sustainable trend, it's likely that many buyers will see this as an even better current opportunity to lock in a low rate, even though rates have remained amazingly competitive on any historic scale, despite the rise from the very low percentages prior to last November's election.
To be able to quickly take advantage of the present situation requires pre-planning, however, so here are some good pointers to help make sure you're in good shape when the time comes to make that all-important home loan application. Please note that these are only general pointers and you should seek professional advice that's completely relevant to your individual situation at the very earliest opportunity.
How's you credit score looking? - The better your credit score, the more likely you are to secure a home loan and at the best possible interest rate. It's therefore never too early to work at improving your score, by reducing and/or paying off debts. Debt to income ratio is an absolutely vital element in a lender's assessment of your ability to repay the mortgage, so the more you can reduce borrowing on credit cards etc., the better. The lead up to house purchase is rarely a good time to be taking out a vehicle loan, so exercise caution there and talk to your financial advisor about the suitability of this in your own circumstances.
Have all necessary information ready - Lenders need to know a great deal about you when considering you for a mortgage. They are trying to build an accurate picture of your financial circumstances, so you need to be keeping easily accessible and clear records of pay stubs, bank statements, tax returns and so forth. Store these in a folder with details of any investments, life insurance policies, vehicles you own and their resale value, along with auto loan, personal loan and credit card balances etc. Essentially you need to include anything that helps to provide a complete picture of your income and outgoings and having all of this data to hand can really help to speed things up, especially if circumstances dictate that you need to act fast.
Establish what you can comfortably afford - While the loan application process dictates this to some extent, it's a nonetheless a great idea to work out what home price bracket you feel is comfortably affordable without over-stretching yourself. If you're a first time buyer, home ownership and indeed the purchasing process itself brings about a range of costs you won't have come across when renting, so talk to a mortgage professional who will have been through the process many times before and can tell you about all the extra expenses associated with home ownership. Only you will know your future goals, of course, so if the plan is to travel in the next few years, for example, make sure that you're budgeting for that possibility and always have sufficient funds for all the unexpected costs that life regularly generates.
Pre-qualified? You need to do more! - We've covered this subject quite regularly down the years, but it really bears repeating again. Don't confuse pre-qualification for a home loan as being pre-approved. On the face of it, they sound like they might be the same thing, just expressed slightly differently. Absolutely not so! Prequalification represents a lender's best estimate of what you should be able to afford. But it doesn't guarantee that you will actually get the home loan. For that you need to obtain pre-approval - a firm commitment from the lender based a thorough assessment of your financial situation. Pre-approval also means that sellers will take your offer more seriously and very likely in preference to a competing buyer without this vital home purchasing "credential".
Don't grab defeat from the jaws of victory - It's common sense, of course, but you shouldn't treat pre-approval as a sign that you are now free to take out a lot of other borrowings. Naturally enough, lenders will recheck your employment status and credit score prior before any money changes hands, so don't risk losing the home of your dreams by a celebratory new vehicle purchase or anything else that's possibly going to fundamentally change your credit rating. This is a time when you want the least possible change to your finances.
Select the right mortgage professional - Just as it's important to recruit a real estate agent early in the process, it pays big dividends to build a relationship with a well-respected loan officer. And although we've left this to the last of our tips, in some ways it should be one of the first stages. That said, the closer you follow the earlier tips, the easier it is for the loan officer to help you.
We enjoy great relationships with the area's top mortgage pros, so why not contact us today and we'll happily point you in the right direction, as well as providing a wealth of other advice related to home purchasing/selling as applicable.