Getting Ready for a Mortgage?
Are you waiting until you are ready to move out of your current home to begin the process of getting financially prepared to buy a home? Most people don’t have a pile of cash lying around to buy a home outright. They depend on financing the loan through a bank and having a mortgage. Applying for a loan is not always very easy to do if your finances are not in order.
There are certain requirements that one must pass to secure a mortgage. Don’t wait until the last minute to get everything in order as it will be a bit frustrating if you do.
What Is The First Step To Prepare Your Credit To Buy A Home?
It is always a good thing to know what your credit score is before you start searching for a home. Checking your credit score is so easy these days. Download the “Credit Karma” app to your smartphone, and you will have instant access without taking a hit for pulling credit the traditional way. If your credit score comes back low, you will then have time to start working on raising it. You can also see if there are fraudulent activities showing up and work on getting them off immediately. This will take some time to remove so getting a head start is always a smart move on your end.
One way of raising your score is to set up payment reminders. You can set this up either on your google calendar or directly with your bank. Setting these up with text or emails is probably the easiest way and quickest to start seeing that score rise quickly.
Lowest Interest Rates Available
Everyone is always searching for who has the lowest interest rates available when buying a home. You’ll find that you will need a Fico Score of 760 or higher to take advantage of the lowest interest available. If your loan is less than this, don’t worry, most lenders require that your Fico is at least 620 or more for a conventional mortgage. The interest won’t be as low as if you had a 760 but it is still not bad because of how low our interest rates are these days.
Applying for A New Credit Card That You Don’t Need Is a NO NO
Every time that you apply for a new credit card your credit score decreases a little bit. So, if you don’t need one, just don’t do it. The only time I would recommend applying for a credit card is if you are one of those people that have paid everything in cash. Kudos to you but in the credit world, unfortunately, this is a bad thing. If you don’t already have credit, lenders do not want to lend you money. Go figure.
Get Those Credit Cards Paid Down
I know that it is easier said than done but paying your credit cards down is one of the best ways to get ready to buy a home. If you find yourself with several credit cards, try paying the one with the smallest amount on them. Once that is paid off, you take that payment that would have gone into paying that card and roll it over to the next one with the smaller amount on it, and so on….
Your Report Shows Errors
When fraudulent activity has taken place behind the scenes, this can hurt your credit score in a big way. It is recommended that you check your credit score once a year. Go line by line and if something is not right, contact the Federal Trade Commission for tips on disputing and getting these things removed from your credit.
Old Accounts Are Old But Closing Them Could Harm Your Score
You may not have used a specific credit card for a long time. Now is not the time to close it. It would then show that you have less available credit and decrease the average length of time that you have had credit.
Save Money For Down Payment And Closing Costs
Alas, saving for the downpayment. When buying a house, you will have the down payment, and then the rest is what you will take out on a mortgage loan. Most people think that they can’t afford to save 20%, but they will be able to afford the monthly mortgage payment. This is when you have to go over the numbers with your Mortgage Broker/Lender. These days you don’t have to come in with 20% down. There are many loan options including a 3.5% down payment (FHA). If you have a military background, you don’t even have to have a down payment. Know that this comes with a price with an FHA loan. You will have to pay MI (mortgage insurance) until the equity in the house builds up to 20%. At that time you can have it removed with a little bit of back and forth with the bank that owns the loan. Know that the higher the down payment and credit score, the lower the interest rate that you will have.
5 Questions To Ask Your Lender
- Do you offer loan rate locks?
- What are your closing costs?
- What are the Origination Fees and Discount Points?
- What is the interest rate?
- Is the mortgage rate fixed or an ARM rate?
- What is the monthly mortgage payment?
- Does the monthly payment include PITI (principal, interest, taxes, and insurance)?
- What is the minimum payment necessary for that monthly payment?
Buying A Home In San Diego?