Applying for Your First Mortgage: What Should You Do?

mortgageSo you’ve decided to apply for your very first mortgage. You probably find the whole process overwhelming even if you’re just thinking about it, and we understand perfectly if you do. Since the global economic crisis of the late 2000s, lenders have shied away from risky mortgages, which, in other words, means that they aren’t as lenient as they were when it comes to approving home loans. But it’s not impossible to qualify for a mortgage. In fact, entering battle armed with the proverbial weapons should be the key to successfully qualifying for a home loan.

First of all, you have to make sure you pay all your creditors in a timely manner. Chances are you’re young and don’t have much credit history on you yet. There’s nothing much you can do about that but pay your other debts, such as your car payments, student loans, and the like, on the due date. But since there may be times when your payment would somehow come in late, take note that mortgage lenders typically allow a maximum of one or two 30-day late payments per two years.

You also have to be sure you’ve saved up enough money to take care of the down payment and closing costs. New government reforms have reduced the minimum down payment on Freddie Mac and Fannie Mae-backed loans to 3 percent, but to set expectations, those who don’t have pristine credit may have to pay up to 10 percent down.

Checking your credit report is another thing you should do before applying for a mortgage. It may seem like a formality for first-timers, but you want to review your credit report carefully, as errors or disputes could do a number on your credit score. And with seeming formalities in mind, you should also get your mortgage pre-approved by your lender – this will tell you whether you qualify for a home loan or not, as well as the maximum value you qualify for.

But since pre-approvals do not always lead to approval, you should also avoid making big “life decisions” before getting approved. You know what we’re talking about – this may mean buying a new car, quitting your present job, or going back to school/attending graduate school, among others. Banks, after all, are cognizant of the possibility that consumers’ financial situations can change dramatically between the application stage and closing.

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