How to Prepare for a Mortgage
When you are ready to finally reach the milestone of purchasing your own home, there is a lot of things on your plate to accomplish. From hiring an inspector to check over the home to finding out how to move all your belongings to choosing the right mortgage company, there is a lot to do before you can kick back and relax in your new home. However, all of your homeowner dreams will turn to dust if you can’t accomplish the first step: acquiring a mortgage. If you are new to the home buying world, getting a mortgage can seem like an impossible task. However, it is doable through organization and dedication, and here is how you can do it.
Get familiar with your credit. If you want to consider getting a home loan, you have to become friends with your credit score. Your credit score, which is any number between 300 and 850, is one of the biggest hurdles standing between you and your mortgage. The higher your credit score, the more likely you will get a loan from a reputable lending agency with agreeable monthly payments and interest rates. You may find a mortgage company that will offer you a loan with poor or fair credit, but beware: these agencies will likely make the terms of your contract unmanageable in that your monthly payments will be too large and you will fall behind.
If you feel like your credit issues are too large to handle on your own, there are mortgage companies you can hire to help you tackle it. If you have many debts and derogatory marks on your credit, a credit adviser can help you settle part or all of those debts or refinance all of the debt into one account.
Develop a savings plan. Mortgages are not cheap. You may need anywhere between $5,000 and $15,000 to give the mortgage company for the mortgage’s down payment and the closing costs of the home buying transaction. If you do not have the funds to cover this, you may want to talk to a financial advisor to work on setting up a savings plan to accumulate this amount over an amount of time that you are comfortable with. Getting a small personal loan for this amount will not work; the average mortgage company will want to see bank statements that show the amount sitting in your own personal checking or savings account for at least a couple of months to know that the money is stable.
Weigh your own expenses. Can you handle the current mortgage rates, and everything else? Purchasing your own home for the first time is an exciting affair, but plunging in before you are prepared will set you up for large amounts of failure in the long run. While mortgage rates can be about the same as what you were previously paying, keep in mind that you are entirely responsible for every utility bill, as well as the house maintenance and unexpected repairs. Make sure that your income and your expenses are weighed evenly enough so that becoming a homeowner doesn’t drown you.
Look for untraditional options. If you still feel like you just are not ready enough for tackling a mortgage on your own, there are other options that you can consider. Some mortgage lenders can offer you rent to own options, which combine renting with homeownership so that you can repair your credit and prepare for a mortgage at the same time. Additionally, there are federal grants that can help people in rural communities and low income families in need get the mortgages that they are striving for.
Once you complete your pre-mortgage checklist, you are ready to break out the champagne and cut the red ribbon on your dream home, because becoming a homeowner is smooth sailing from here.