Real Estate Matters
By Elisa Jo Eagan
The mortgage application and approval process can be one of the more difficult aspects of home buying. Work your way through this list and you will be well-prepared for your journey to the closing table.
- 1. Check and repair your credit
When you start thinking about buying a home, take a deep dive into your credit. There are three major credit reporting agencies: TransUnion, Experian and Equifax. Each may have different information.
Mortgage companies use a tri-merged credit report, so getting a credit report through a mortgage lender is best. This allows you to see everything the lender sees. If there are errors on any of your reports, a mortgage lender can assist you in reaching out to correct the information.
If your credit is not great, here are a few suggestions:
Seek ways to build your credit. Get a starter credit card, make small charges and pay them off immediately. Look for programs that report your rent and utility payments to the credit bureaus to help build your score.
If you have damaged credit, work on paying down debt and making on-time payments. Reporting programs for rent and utilities can also help rebuild your score.
As you pay off credit cards and loans, keep the accounts open with a zero balance or use them for small purchases that you pay off immediately.
- Organize your financial records
When applying for a loan, you’ll need to provide various financial records such as:
- Tax returns (generally two years’ worth)
- Pay stubs, 1099s, W-2s, or other proof of income
- Bank statements and asset statements
- Photo ID
Lenders may require additional documentation. Make sure to check what is acceptable for your situation.
- Find a lender
Finding a trusted lender is essential. One of the best ways is by asking your local real estate professional. Make sure you feel comfortable with your lender so you can confidently navigate the process.
- Consider a variety of loan options
You are not limited to a conventional, 30-year loan with a 20% down payment. While this works for some buyers, it may not be the best fit for everyone.
Work with your lender and real estate professional to explore:
- Down payment assistance programs
- First-time homebuyer grants
- FHA loans (3.5% down)
- USDA loans (100% financing)
- VA loans (no money down for qualified veterans)
Or if you are comfortable with a higher monthly payment, a 15-year loan may make more sense for you than a 30-year loan.
- Get pre-approved
Before you start house hunting, it’s important to work with your lender to get pre-approved. This process helps you determine your budget and timeline, ensuring you know what you can afford before falling in love with a home. Additionally, having a pre-approval strengthens your offer when you find the right property.
- Determine your budget
Once you know your loan approval amount and interest rate, create a realistic budget. Just because you qualify for a high amount doesn’t mean you need to spend that much. Choose a budget based on your comfort level.
- Don’t forget the extras
Beyond your mortgage payment and down payment, remember:
- Earnest money escrow deposit
- Reserve funds required by lenders
- Closing costs and insurance
- Moving expenses and setup costs
Following the suggestions above will help you have a smooth mortgage experience.
For real estate information and advice, contact Elisa Jo Eagan, the “Real Estate Godmother,” at 609-703-0432. Learn more at www.TheRealEstateGodmother.com.
For More Real Estate Questions, Information and Advice Contact Elisa Jo Eagan “The Real Estate Godmother” (609)703-0432 and Remember…”There’s No Place Like Owning Your Own Home!”
