WHAT TO PREPARE FOR BEFORE APPLYING FOR MORTGAGE.

CHECK YOUR CREDIT SCORES

It is highly recommended that you have your credit report checked and reviewed by a mortgage broker before shopping for a new home.  Your credit report has a huge effect on your new mortgage. Your credit score will dictate if you can get the best rate or at the lowest costs. The information on your credit report will determine how much you can borrow. Therefore it is very important to make sure the information on your credit report is correct.  If any information on the report is incorrect, you need to rectify it so your report is accurate to ensure you have the best chance to get loan approval.  I do not advise you to pull your own credit report. This is because when you pull it yourself you only get one of the three credit agency credit score.  What you need is a report to pull all three credit agencies to get all three scores.  Any mortgage broker can do this for you and they can review it and let you know if anything is wrong.  For my clients, I always order the credit report on their behalf and review it to make sure the report is accurate. If not accurate, I will always advise them what we can do to fix the report to get the highest score possible.

KEEP YOUR INCOME DOCUMENTS

In order to show how much you earn per month or year you will need to provide at least one or two years of W2s and one month paystubs if you are a salary or wage earner.  If you are self employed then you will to provide last two years of FEDERAL TAX returns.  So it is very important for you to keep all your paystubs, W2s, and tax returns for records.  If your income depends on overtime and bonus pay, it is VERY IMPORTANT to keep provide year ending paystubs in addition to the items above.  Your year ending paystubs will show the total  amount you earned in bonus and overtime for the year.  Banks can use this income in addition to your regular pay if you have two year history of earning bonuses and overtime pay.   The more income you can show the more money you can qualify for on your new home purchase.

NO LARGE CASH DEPOSITS TO YOUR BANK ACCOUNTS

Often, buyers would deposit alot of money into their bank accounts before they buy a home.  When this happens your bank statement will show large deposits in your accounts  Any large deposits MUST be verified ( meaning you need to show evidence where the money came from ).  If the money deposited is cash, then this money CAN NOT be used as your downpayment money in the purchase transaction. This is because cash money is not verifiable.  So if you have any large deposits showing on your bank statements when applying for a mortgage, you need to provide documents ( bank statements, cancelled checks, or official statements / reciepts ) to show evidence where the money came from.  So if you have to deposit alot of money into your account for purchase money, it is best to do so several months ahead of time before you apply for a mortgage. This way your money in your account has been seasoned and no large deposits will show on your bank accounts. NOTE: a deposit as small as $500 may need to be verified depending on your loan file.

GIFT MONEY FOR DOWNPAYMENT

When you purchase a home as your primary or second residence, gift money from family members are allowed for downpayment. However gift money is NOT allowed on investment property purchases.  Therefore if you are planning to purchase a future investment property, you must have your downpayment ready in your own accounts before applying for an investment home mortgage. You can always contact me to go over your future home purchase or refinance plans so I can assist with future planning for new mortgage.

TRY NOT TO GET A NEW CAR LOAN OR LEASE BEFORE APPLYING FOR NEW MORTGAGE

Do not obtain new AUTO LOAN or LEASE before you plan to apply for a new mortgage.  Auto loans/leases are expensive which may costs $300 - $1500 per months depending on the vechile you get. This large monthly debt will count against you when you want to buy a new home.  Every lender does a debt to income calculation on mortgage applications to determine if borrowers are qualified for a new loan.  If the total monthly debt ( car, credit cards, housing monthly payment, etc ) is to high, it will decrease your ability to obtain a higher loan amount.  For example,  a $500 monthly debt from a car payment is equilivent to a mortgage loan amount of $100,000.  So if you obtained a car loan of $500 per month before you buy a home, the car loan just decrease your borrower ability for $100,000.  Therefore in order to get the fullest potential from your income to borrow the most money, do not get any new loans before you buy a new home.

HOW MUCH TO BORROW

I always ask this question to to my clients, " What is the monthly housing payment ( mortgage, property tax, home insurance ) you can COMFORTABLY afford each month? ".  Why this question? It is because knowing what your comfort level is in terms of payment will help you in the home purchase process.  Just because you can qualify for a million dollar loan does not mean you can easily afford the monthly housing payment. There are many other financial responsibilities you will have besides the mortgage payment so it is important for you to know what is the maximum housing payment you can comfortably afford.  Once you determine what this number is, we can calculate the purchase price and loan amount you can qualify for based on your desired maximum housing payment.  So when you start your home search, you can rest assure that you will be looking at homes that do not exceed your budget and have confidence in getting the home loan approved. This will make your home search experience much more pleasant and avoid the second guessing if you can afford the home or not.