Home Court Series Part I – First Time Home-Buying Mistakes and How to Avoid Them
Home Court Series Part II – Get Mortgage Ready in Four Steps
March 10, 2020 by Chevron Federal Credit Union
Home Court Series Part I helped rookies avoid first time home-buying mistakes. Part II is all about getting ready to take the big step and buy a home. Hopefully, following these steps will make the process a little less intimidating.
Here are four steps you can take now to get mortgage ready:
Step 1: Review your credit report.
- Access your credit report to ensure your creditors are sharing accurate information
- Dispute any errors you find directly with the credit bureaus
- Satisfy unpaid collections or negotiate with creditors for a less-than-owed payoff
Step 2: Bring your debts current, pay your bills on time, and reduce your balances.
- Look for any late payments that may be dragging your score down that were reported in error
- Reduce your balances or pay them off whenever possible
- To avoid lower scores, keep balances low (below 30% of your limit) throughout the application process, and don’t take on any new credit
Step 3: Save money for upfront costs and down payment.
- Lenders typically collect an application fee or an appraisal fee when you begin the process
- Sellers will likely require a money deposit (amount varies) after you write an offer to purchase
- As you approach your closing date, you will need to provide funds for the down payment and closing costs
Step 4: Gather your income documentation.
- Most recent 30 days of pay stubs, bank statements, and two years of federal tax returns
- Two-year employment history (in the same line of work) for each borrower
- Self-employed borrowers may provide a profit-and-loss statement and two years of tax returns
The better prepared you are when you apply for a loan, the easier the process will run. Don’t be surprised if the process is taking some time and that you may need to supply updated information along the way.
For more information on the Home Court Series, please check out the rest of the posts here:
- Part I – First Time Home-Buying Mistakes and How to Avoid Them
- Part III – Three Mortgages Every Home-Buyer Should Know
- Part IV – Is It Time to Refinance Your Mortgage?
BALANCE is an amazing resource for all our members to utilize when taking on life's milestones. With trusted guidance available for free, they are ready to help everyone on the path to financial wellness. This article and many more can be found on their website: balancepro.org.