Your First Home Mortgage? Here’s What You Need To Know Before Applying By Charles Kirkland
Whether it’s your first home or you’re looking to refinance, applying for a mortgage is a big decision. It’s important to be prepared with the right information and paperwork. This blog will walk you through everything you need to know before starting the application process.
Get Pre-Approved
If you’re looking to buy your first home, it’s important to get pre-approved for a mortgage before you start looking for a home. A preapproval from a lender or mortgage broker means that they have reviewed all of your financial information and determined that you are likely able to qualify for the amount of money needed for the purchase of the property.
A preapproval doesn’t require any money down on your part; however, if you do put down some money as an earnest deposit (which is often required), this amount will be deducted from the total amount approved by the lender.
Understand Your Credit Score And History
If you’re looking to buy a home, your first step is to understand your credit score and history according to Charles Kirkland. Your credit score is a number that represents your creditworthiness, and it’s based on information in your credit report. The higher the number, the better off you are–and lenders use this number as part of their decision-making process when deciding if they want to lend money for something like buying a house or car.
The next thing to know about is what goes into calculating an individual’s overall score:
• Credit history accounts for 35% of this calculation;
• Recent activity (within 6 months) accounts for 30%;
• Types of accounts used (mortgages vs student loans) makes up 15%;
• Length of time since opening an account contributes 10%.
Know Your Debt To Income Ratio
Charles Kirkland Knowing your debt to income ratio is important because it will help you determine whether or not you have enough money left over at the end of each month to cover other expenses, like car payments and student loans.