Congratulations on your decision to buy a home! At South County Mortgage, there’s nothing we love more than a #HappyHomeowner! Purchasing a home is a major milestone, and while it’s the “American Dream,” at times it can be stressful. You may feel that you don’t know where to start, or that you have a lot of questions but don’t have all of the answers. That’s where we come in! We’ll guide you through the process as you venture down the path to homeownership. But first, let’s start this journey with the first step: getting everything you need ready for the mortgage application.
Determine what you can afford and are willing to pay
Your lender will take into account your income, debt, down payment amount, and credit score, among other things. Lenders set limits on your DTI (debt to income ratio), which means that your monthly costs cannot exceed a percentage of your income. After you submit your mortgage application, you might find that you qualify for more than what you are comfortable with actually paying. Determine what makes the most sense for your monthly budget based on all of your income and expenses, and then work backwards from there. You can also use our online calculator to get an idea of what your payment might be.
Clean up your credit.
It’s important to know what your current credit score is and what information is reporting to your credit report. By law, you can get a free credit report from Annualcreditreport.com once per year. You can also contact the three national credit reporting agencies – Equifax, Experian and TransUnion – and request a copy from each. The three agencies are independent of each other and the information may differ on all three reports. In addition, you may not know which agency your lender will use to check your credit, so it’s best to verify that all three have correct information about your credit history. If there are any red flags, or incorrect, inconsistent or derogatory information, it’s best to know ahead of time and correct it before putting in your mortgage application.
Save for a Down Payment
Most mortgages require a down payment, and although there are programs that require little to no down payment, it’s still a good practice to begin saving right away. An ideal down payment is 20% or more. It’s also a good idea to keep those funds separate from any other funds so that you are not tempted to spend them before they are needed. We also suggest putting aside some liquid cash for any moving expenses (moving truck, supplies, cleaning, etc) or out-of-pocket expenses that may come up throughout the process. Once you submit your mortgage application, you’ll have a better idea of any closing costs or other funds you might need to come up with out of your pocket.
Get your docs in a row
There’s lots of financial documentation you’ll need once you start the mortgage application process, and that can take a while to get organized, so the first step is to start getting all your paperwork ready. At minimum you will need:
30 consecutive days of most recent pay stubs
last 2 years tax returns (all pages and schedules)
last 2 years W-2s or 1099’s from all employers
2 months most recent bank account statements (all pages, for all accounts)
If you have any retirement accounts, stocks or bonds, you’ll also need records of those
Your loan officer will give you a list of anything else you might need.
Submit your Application!
So now that you know what your comfortable paying, you’ve got your credit in check, you’ve got the money set aside for the down payment and expenses, and all your docs are ready and organized – that means it’s mortgage application time! You can now call or visit your Loan Officer to get pre-approved for the right loan product. Your Loan Officer will discuss your current and future financial situation and goals, review your documentation, pull your credit report and determine what you will qualify for. This will give you a good idea of where to start in your home search. The application itself should take anywhere from a few minutes to an hour, depending on how many questions you have. After that point, your Loan Officer will guide you through the rest of the process right to the closing!
Don’t be afraid of the mortgage application process! It’s not necessarily time consuming, and if you follow a few simple steps to get started and have all your information organized, your Loan Officer will do the rest. The more prepared you are, the more smooth and easy the mortgage application process will be. If you are still not sure where to start – give us a call and we’ll help you!
Are you a #HappyHomeowner? We’d love to hear about it! Tell us on social media or email firstname.lastname@example.org.
South County Mortgage is a licensed mortgage brokerage providing better than bank service and better than bank rates to Rhode Island residents for over 20 years. Visit our website for more info, www.scmtg.net.