There are several steps you should take before you start your house search, in case you think you are ready to purchase a new home. Most importantly, you need to get your finances organized. Not only do you need to systematize your finances so you can decide how much you can afford, you will also need to supply the mortgage lender with precise information that will be used to decide whether or not you meet the criteria for a loan and what terms and rates you will receive.
Check into Your Credit
The initial step you should take toward organizing your finances is to take a look at your credit report. You are entitled to a free credit report once per year and you can get it by going to www.annualcreditreport.com. This is the best place to go for your free credit report, because there are no strings attached.
Check out your free credit report after obtaining it in order to make sure all of the information in it is accurate.
If you notice anything that is incorrect, contact the credit reporting bureau and notify them of the error. After this, wait until the problems have been taken care of before you begin the process of applying for a mortgage loan.
Gather Your Paperwork
You need to start gathering paperwork to share with the mortgage lender only when you are sure that your credit report is looking as good as possible. The paperwork you should gather includes:
Income tax returns for the past three years Bank statements from the past three months Copies of your current pay stubs and records of any additional income you may have Receipt of credit issues that have been resolved Copies of bankruptcy or divorce settlements
This information will help the mortgage lender form an overall picture of your financial situation. If you do have some red marks on your credit history, you want to be certain to bring in as much documentation as possible to demonstrate that you are on track and doing better where your finances are concerned.
Pay Your Debts and Save Up
If you are encumbered with a large amount of debt, you should take steps to fix that problem before you apply for a mortgage loan. If possible, even small debts should be paid off.
You should also avoid acquiring new debt The chances of being approved improves if you less debt when applying for a mortgage loan.
Your assets play a major role in determining whether or not you are approved for a loan.
Areas the mortgage lender will consider include:
Your savings account Any investments you have, including bonds, stocks, and mutual funds The cash value of your insurance policies Monetary gifts provided by family members Your monthly salary
Though it is possible to get a mortgage loan with a not-so-good credit history and with little money in savings, you will receive better terms and a better interest rate if you take these steps prior to applying for a loan.