Buying a home is one of the most important decisions a family will make. It marks the start of your new life together while bringing security for you and your loved ones. That’s why it is so important to be prepared. There is so much about the mortgage application process that potential home owners do not understand. Here are a few tips and tricks to put into practice before applying for a mortgage.
Many financial decisions hinge on the credit score. Like it or not, the credit score is a key factor when it comes to lenders evaluating potential borrowers. Without a qualifying score, it may be difficult for prospective borrowers to merit a loan.
Even though there are ways to get around a poor credit score, those may not be to your liking. Bad credit history will trigger higher interest rates or attract unscrupulous lender practices. The best way to avoid trouble is to do your best to increase your credit score.
Most know that credit scores are on a seven-year cycle, so information older than seven years should not remain on your credit report. It’s wise to take advantage of free access to your credit report through annualcreditreport.com, the federal government-backed credit report service or companies like Credit Karma.
Credit scores increase with on-time payments, low credit utilization, fewer inquiries and the absence of civil judgments, charge-offs and liens. Though it may take time, even the worst credit score can improve over time. The best advice – never accumulate more debt than you can realistically afford. But if you can’t wait, there are alternatives that we can show you.
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You’ll need to present quite a bit of information when applying for a mortgage, so adequate preparation is key. It helps to have the required information already compiled and to know what lenders are looking for before submitting an application.
To ensure a smooth process, be sure to order bank records and statements ahead of time. You’ll need at least three months’ worth. Most banks also ask for tax filings for the last two years. Some applicants may also need their incomes verified, so be sure to collect pay stubs and W-2s or speak with your employer’s accounting office for more in-depth records such as a salary letter.
Don’t go into the bank blind. Financial advisers can assist with mortgage application preparation saving time and money. Advisers may also have insight into details about the application process that most applicants do not have or do not know to ask about.
In addition, a professional adviser may be able to help applicants understand the nuances of the mortgage process. For instance, in addition to the already mentioned info required, lenders may also base application decisions on a borrower’s income distribution based on the 28/36 rule.
While preparation is key, it helps to know which activities might harm the application process as well. A professional is the best source for such information. An experience adviser knows how to support your mortgage application, so reach out to one to ensure best results.