Are you looking forward to owning a home without affecting your financial health? Look no more and apply for a mortgage! A mortgage is an excellent way to finance the purchase of a home, where you get to make monthly payments while the value of your home increases. Mortgages are good debts because homes appreciate, but that doesn’t mean you should get into one without doing relevant research. Lucky for you, we’ve gathered a few points to help you learn more about what you need to know before applying for it.
1. There is a Difference Between Mortgage Pre-approval and Pre-qualification
Mortgage pre-approval and pre-qualification might seem like the same thing. However, a pre-qualification is an estimate of how much you can borrow based on earnings or bank statements. A pre-approval is given by a lender who has analyzed your finances and determined how much you can borrow. Pre-approval is done after pre-qualification which doesn’t guarantee you’ll get the mortgage.
However, if your mortgage is pre-approved, your application will likely be approved. This means you will close on the property. With finances, people buy the house of their dreams, typically with a swanky lawn yard. According to Weed Pro, a grass lawn should be no more than a fifth of an acre.
2. A High Credit Score is an Added Advantage
Lenders are highly cautious before lending money, so it is advantageous if your credit score is impressive. Buyers with low credit scores get relatively higher interest rates and pay more for their mortgages over time. By paying off your outstanding debts, you can improve your credit score. It is also advisable to avoid opening new accounts used for credit checks before acquiring your mortgage.
3. Lenders Highly Value Job Stability
Your credit score is essential, but having a stable job and a reliable income is more critical. Changing companies can make lenders nervous. If you are about to start work at a new establishment, you should put the plans on hold till the papers are signed off, and then you can venture into new opportunities. The same case should also apply to any co-signers of your documents.
4. Paperwork is Required During Mortgage Application
Collecting and preparing your financial documents before applying for a mortgage helps speed up the process. The essential documents lenders ask for include the last two or three bank statements and two years of tax filings, including the most recent year. Additionally, you will need supporting documents for recent large withdrawals or deposits. Co-signers of your financial records are required to produce the same documents.
5. Avoid Making Financial Changes Until Your Mortgage is Finalized
Doing a makeover or purchasing a new item for your house is tempting. However, it is quite a risk since your lender has an eye on your bank account. Your account should remain stable until the mortgage is processed and you become the newest homeowner in town. Once the deal closes off, you can proceed to make big purchases.
6. Reverse Mortgage is Different from a Conventional Mortgage
According to the Consumer Financial Protection Bureau, a reverse mortgage is only accessible to people 62 years or older. It also allows homeowners to take loans and use their homes as security. One of the advantages of taking a reverse mortgage is that you don’t have to pay for the loan as long as you continue living in your home. The loan falls due if you move houses or when the occupant passes away.
Usually, many people pay reverse mortgages by selling the home. However, you are expected to take care of the home during occupancy. The National Roofing Contractors Association recommends inspecting your roof at least twice a year. If you’re looking for ways to fund your retirement but prefer to avoid a loan, a reverse mortgage is the best option.
Applying for a mortgage comes with myriad financial benefits. For instance, purchasing a home is a good investment you can use as loan collateral. Don’t hesitate. Apply for that mortgage and start your journey toward owning a house!