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Buying a home can be an exciting time in your life. Perhaps you view purchasing one as a new start for you and your family, or maybe you see getting a home as making an investment. No matter why you are thinking of getting a home, you’ll need a mortgage. If this is your first time making such a big purchase, it can be overwhelming, especially if you don’t know where to start. Check out these tips so you can start the process with an understanding of what you’ll need before you begin.
1. Get All Your Documents Together
Before you start going to banks, it is important to have everything you’ll need throughout the mortgage process. This might vary slightly based on where you live and what bank you ultimately choose to apply to. However, common documents you’ll need include ID for yourself and any other adults who are applying, pay stubs, recent tax returns, and current bank statements that show what you have in both checking and savings. In the case of gathering documents, it is better to be over prepared, so gather everything you think you might need and be ready to go back in case more information is required.
2. Double-Check Your Finances
You’ll need to make sure that you have more income than debt when taking out a mortgage. This is also known as a debt-to-income ratio. Since you’ll need proof of income prior to applying for a mortgage, this is the perfect time to calculate how much you and any other adults who are on the application with you bring in every month. Then, take a look at debts you currently have, such as car loans, credit cards, and so on. Knowing how much you have and what you owe can help you understand what your chances are of getting approved. If you feel the debt ratio is too high, consider what you can do to increase your income, such as taking a higher-paying job or a second job, and how you can decrease your debt, such as paying off a credit card.
3. Understand The Benefits To Get Pre-Approved
When shopping for a home today, many would-be homebuyers have found it easier to get pre-approved first. While it can be fun to search for your dream home, you don’t want to waste time finding the ideal home only to discover it costs more than you can afford. By taking the time to get pre-approved, you have a slightly better idea of what’s within your budget. It’s important to remember that getting pre-approved is only one part of the process, but by completing this early on, you can save yourself time and hassle, without worrying about what homes are within your price range.
4. Learn As Much As You Can About Mortgage Rates
Mortgage rates vary depending on factors such as how much you’re willing to spend, where you live, and the type of home that you want. Over time, these rates may go up, particularly if the market is considered hot. Find out what the mortgage rates are for your area and the type of home you are looking to buy, and then once you are ready to buy, see about locking in. Locking in can prevent the rate from going up, but it is usually only good for a certain amount of time. Keep in mind locking for longer periods of time tends to be more expensive too, so choose wisely.
When getting a mortgage, gather together all the documents you’ll need. During this time, it is helpful to review your finances and make sure your income is greater than debt. Find out about the pre-approval process and how going forward with it can save you time and headache. Finally, learn about the mortgage rates in your area and locking in, once you are ready to buy. These tips can make the purchase of your first home a smoother experience.
