You’re ready to realize your dream of homeownership. You spotted the perfect neighborhood, the one with the tree-lined streets, tidy houses, and well-manicured lawns. The next step is to get a mortgage. It can become overwhelming very quickly! Take a deep breath and relax – although there is a fair amount to do – we can get you through the process fairly pain free!
Here are 5 tips to help you secure your first mortgage and make the process easier.
Check your credit score. A good credit score demonstrates to lenders your creditworthiness, that you have the financial self-control to pay back your mortgage. Credit scores range from 300 to 850. The higher the better because your score determines what mortgage rates you qualify for. Request a free credit report from the three major credit bureaus, Equifax, Experian and TransUnion. Report any errors you see on your credit report immediately to get it corrected.
Manage your debit. Don’t apply for any new credit cards or take out a new car loan while you are shopping for a mortgage. You want to keep what’s known as your debt-to-income ratio down, a formula lenders calculate to determine how much you can afford to borrow. It compares the amount you owe to what you earn each month. If the ratio is too high, you might be considered a financial risk. Another good way to keep your debt-to-income ratio down is to pay down your credit card balances. The less you owe creditors, the better.
Choose a lender or mortgage broker. Don’t make the mistake of falling in love with a house only to find out you can’t afford it. A lender or mortgage broker (that’s us!) can save you from the heartache. A qualified lender or mortgage broker will get you pre-approved for a mortgage to determine what kind of house you can afford and calculate the interest rate due on the mortgage.
Save up for a down payment. You’ll need money for a down payment to get a mortgage, Ideally 20 percent of the purchase price of the home. Money is also is needed to pay for closing costs, a year’s worth of taxes on the home, home owner’s insurance and for mortgage insurance if applicable, which protects the lender should you default on your loan.
Get your documents organized. You’ll need to show proof of your income before a bank can offer you a mortgage. Get your paperwork ready in advance. Gather copies of your recent bank statements, tax returns, and paycheck stubs. Having all the documents on hand will make the mortgage process easier.
Litchfield Bancorp is ready to make your dream of homeownership a reality. To learn more about any of our mortgage options and to find the best plan for you, give me a call at 860-393-9145 or 860-482-9707.
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