Preparing Financially for the Mortgage Process

Purchasing a home is exciting and adventurous. Home buyers, particularly first-time home buyers, typically don’t know a lot about the process of financing a home. To avoid making mistakes, you need to know what you should expect. It is important to consider the state of your credit, the additional costs besides just the down payment, and the important questions dealing with the future.

 

The Credit Aspect

Your credit score is one of the first things a lender will look at when you apply for a mortgage. To cut through all that confusion, here are five tips you can act on right now:

  • Check your credit reports for free once a year through the three credit bureaus: Equifax, Experian, and TransUnion. Why all three? Because the information in each of the three bureaus’ reports can differ. If one or all of the reports include mistakes, your credit score may be negatively affected, and you may need to address the errors before going house shopping.
  • Be strategic with credit card use. The percentage of your credit limit that you use every month can affect your score. Make sure your balance doesn’t come too close to your limit.
  • The simplest and most important tip? Pay off your balance each month. To maintain a healthy score, pay off the balance before the due date. Anything after 30 days past the due date can spell very bad news for your score.
  • Be consistent. Good credit behavior over the long term will keep your score high.
  • Don’t take on more credit. If you apply for several different credit cards, you’re sending a message that you may have maxed out your other accounts

 

Save enough for the down payment and other additional fees

You should plan to make a down payment of 3.5% – 5% at the very least when you are determining affordability. It is important to consider that down payments are not the only costs associated with the purchase of a home. Your lender should be able to provide you with a breakdown of your costs that you will be paying upfront and on a monthly basis. Here are some basic tips to help you save for the costs associated with buying a home:

  • Start a budget: Making a budget allows you to see your expenses, how much money is coming in, and what is left over to save or pay off debts. When you have a savings goal it, helps prioritize your money by eliminating or cutting down on unnecessary expenses.
  • Automate: Once you have created a budget and figured out how much you can comfortably save each month or paycheck, set up a specific amount or percentage of your paycheck to go to savings automatically. For some, it helps to open up an entirely separate savings account for their home’s down payment and expenses. This method allows you to see how much you are saving specifically for the home buying process and keeps you from accidentally spending this money on something other than your new home.
  • Increase your income: If you are worried about cutting back expenses, or just want to save for your down payment faster, consider finding ways to increase your income. Some ideas include working overtime, getting a second job, or finding alternative ways to making money such as selling items online.
  • Save any unexpected money: When you get a large sum of money, such as a bonus or your tax refund, itis all too easy to take on the extra cash and purchase that one expensive thing you’ve had your eye on for months. Instead of going on a shopping spree, take that money and put it into your savings right away to help you achieve your dream of homeownership sooner.

 

Affordability now and in the future

Regardless of the level of income you have today, you need to figure out what the future may hold before you sign on the dotted line. For example, if you’re planning to have kids sometime down the road, how will these happy additions impact your family income? What effect will job changes have on your current income level? And have you planned for monthly payments into your rainy day savings account?

Everyone who looks to buy a home will have a payment amount that is affordable today, but in the face of your answers to the questions above, will that number still work for you down the road? These are some questions to consider as you think about homeownership.

 

Feel free to talk with a loan officer in your area to determine if homeownership is the right path for you!

National Homeownership Month

National Homeownership Month

Each June during National Homeownership Month, we reflect on the value of homeownership.

Smarter, Happier & Healthier

Americans strongly support homeownership, with good reason. Becoming a homeowner makes families smarter, happier, healthier, and wealthier. In a recent study, homeowners also reported improvement in their children’s well-being, school performance, attendance and higher participation in extracurricular activities.

Buy a Home, Create a Job

The housing market recovery has done more than add wealth and bring happiness to U.S. homeowners; it has also added jobs. According to a recently released report, after experiencing heavy job losses during the recession, the construction industry is building up its headcount again. Since 2011, the U.S. has added more than 187,000 construction jobs, an increase of 2 percent.

The Dream Continues

According to a recent survey, while 66% believe housing is a good financial investment, 75% see it as an important part of raising a family. A total of 87% of respondents said owning their home is something they have always wanted.

Become a Homeowner

It all begins with a plan. If owning a home is one of your goals, there are a lot of questions to ask yourself:

  • Are you ready? In order to qualify for a mortgage, you need a steady and reliable source of income and an established bank account. Your lender will also review your credit report to establish that you pay your bills on time and manage your debt well.
  • How much can you afford? Homeowners pay taxes, insurance and must be able to maintain the purchased property. When calculating your total monthly expenses, make sure you include regular payments that may not be reflected on your credit report, such as child care, groceries, and entertainment. Be honest with yourself about how much you can afford to pay each month now, to avoid any financial difficulties later.
  • Where do you start? Contact a licensed Inlanta Mortgage loan officer to discuss your unique financial situation and learn more about the road to homeownership. Find a loan officer near you using our branch locator or apply online now. When you apply online, we will connect you with a loan officer licensed to originate in your area.

More Resources for New Home Buyers

These resources are available all year long – not just during National Homeowership Month. Visit our blog often for more articles and resources for homebuyers.

 About Inlanta Mortgage

Inlanta Mortgage is proudly celebrating twenty years in business. Learn more about Inlanta’s twenty year history.

Inlanta Mortgage offers Fannie Mae/Freddie Mac agency products, as well as a full suite of jumbo and portfolio programs. The company is fully delegated HUD-FHA including FHA 203K, VA, and USDA approved. Inlanta Mortgage also offers numerous state bond agency programs. Review Inlanta’s mortgage loan programs.

Inlanta Mortgage is a multi-state mortgage banker based out of Brookfield, Wisconsin. NMLS #1016. Inlanta Mortgage is proud to be named to the Scotsman Guide Top Mortgage Lenders 2012 list and to be among the Top 100 Mortgage Banking Companies in America in 2012.