Applying For A Mortgage? Read This First.

Unfortunately, mortgage rates are nowhere near to hitting a low right now, and in fact, currently, if you take a mortgage, you will end up paying more every month.

While applying for a mortgage, we all want to change our income or even the length of our credit history but it’s like touching the impossible. While we can’t achieve the unachievable, there are certain other factors that can still serve your purpose of smoother mortgage experience. I have enlisted a few below:

#1 Keep all your documents ready

There is a lot of paperwork that go behind your mortgage. Your lender will ask you for a lot of documents for various reasons, so it is always better if you are pre-prepared with it. You need to know what you need.

For instance, you will be asked to produce the past two year’s income tax reports and tax filings along with around 3-month bank statements, so make sure you have a copy for each one of them. Long story short, you will not be asked for any documentation that you can’t access or have difficulty to process but you will have to keep them handy.

#2 Know how much you can afford and borrow

Before you apply for a mortgage, it is important to reckon your limits and borrow likewise. Borrowing more than you can repay will instead dig another hole of stress and problems for you trapping you into a vicious circle of the financial crisis. Understand that you can’t flee from repayment.

So, what is your limit? This completely depends on your lifestyle and spending behaviour. But if you ask me for a figure, I will suggest the famous 28/36 rule. This means your monthly payment for the mortgage alone shouldn’t cross 28% of your yearly gross income. The 36 implies 36% of your gross income that must be the upper limit for all your other payments and monthly installments. Remember, this is not an ultimatum and mortgage lenders might be less strict than this but it’s always better to comprehend your borrowing limits.

#3 Understand where you are buying in

You see, there is not any hard-and-fast rule about the functioning or guidelines of a mortgage. Even if there is, it greatly varies in different markets, states and sometimes even in different regions. Some have very strict standards to match on the other hand while some don’t and in such a scenario, a real estate professional can come to your rescue and ensure that you are not sold on not-so-good properties.

#4 Improve your credit score

Aiming for a credit score with an all-time-high can be really difficult but there is always room for improvement. The first thing you must do is reckon your credit score. There are various available ways to do it. Next, make sure your credit reports are error-free and try and pay the balances still due in your account, this will cast a positive impact on your credit score and improve it considerably. You can also ask your provider about some more suggestions that can help improve your credit score.

#5 Pay off your debts

It is simple, if you want the process of applying for a mortgage to be smooth; you need to improve your financial health. That’s it. But improving your financial health is certainly not a joke. You need to plan for it, significantly. Start by paying off your debts and let the other factors take over. Don’t be afraid of these international debt collectors, if they call you for settling down a pending debt. Talk to them and pay your pending bills at the earliest.

#6 Make sure all your taxes are paid

Like I mentioned in the that your lender will ask you about your tax files and statements. That means you need to keep them in order. You don’t want any defaults and incomplete documentation to come in the way of you securing a mortgage for your dream home. Keep this in mind and file for current year taxes.

Wrapping up, I would like to end with one last piece of advice: making big purchases before your mortgage wouldn’t be a wise option. Your finance records will be monitored, the reason why all your expenses – small or big, matters. So why take a chance?

#7 – Senior homeowners looking into reverse mortgages should compare various lenders online, check lender reviews and ratings before applying and make sure you discuss options with a trusted financial advisor weighing pros and cons (click here) before entering any contract as these loans can be costly and not right for everyone.