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Tips on being prepared to purchase a home

home for saleTips on being prepared to purchase a home

1. Know Your Credit Score

Before starting you home search pull your credit report and order your credit score.  Credit scores and credit activity have a major impact on mortgage approvals.  Most lenders require a minimum credit score of 680 (620 for FHA mortgage loans).  A lender can deny your request for a conventional loan if your score is below 680.   Your loan could be denied if you have a history of missed payments, frequent lateness and other derogatory credit information.   If you are serious about purchasing a home, pay your bills on time, lower your debts and make sure your credit report is correct.

2. Save Your Cash.

The days of zero-down mortgage loans are gone.  Be prepared to have enough cash to come up with a down payment.  All lenders have their own down payment criteria.  The typical down payment is around 3.5% of the loan amount.  The down payment is not the only expense you will have to worry about.  There will be closing cost, home inspections, home appraisals, title searches, credit report fees, application fees and other expenses. START SAVING NOW !!!

3. Stay at Your Job

Don’t be an idiot and leave your job before closing on the loan.  A change in you working status will either stop or delay the mortgage process.  Mortgages are approved on the information provided in the loan application.  Taking a lower-paying job or quitting your job to become self-employed screws up the process and lenders must re-evaluate your finances to see if you still qualify.

4. Pay Down Debt and Avoid New Debt

The amount of debt you have determines if you can get a mortgage and how much of mortgage you can acquire.  Lenders look at your debt and Approvedyour income and will calculate a debt-to-income ratio.   The higher the debt-to-income ratio the greater the chances are that you will not be approved for a mortgage.  To better you odds of mortgage approval pay down your debt  before you starting your home search.

Once you have been approved for a mortgage do not acquire any new debt.  Your lender will re-check your credit prior to closing, and if your credit report reveals additional or new debts, this can stop the mortgage from closing.

5. Get Pre-Approved for a Mortgage

Getting pre-approved for a mortgage before you begin searching for a home maximizes your chances of getting your dream home.   In a market when there is a shortage of available homes you need to be the first to make an offer.  Getting pre-approved for a mortgage is easy.  Fill out an application, submit your financial information and wait for a response.  Your lender will provide you with a pre-approval letter that details how much you can afford and the interest rate you will pay.

6. Know What You Can Afford

Don’t be surprised if your mortgage company approves you for a mortgage that you can’t afford.  Remember the goal of the mortgage company is to loan as much money as they can.   Don’t let the mortgage dictate how much you should spend on a home.  Review your budget and be honest with yourself.   Make sure your home payment fits within your budget.   DON’T OVER EXTEND YOURSELF !!!!

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