4 Things You Should Do Before Applying For Your First Mortgage
Applying for your first mortgage can be overwhelming.
For many buyers, it can take a little bit of work before a buyer is able to buy a home. Sometimes a buyer will need to work on establishing credit, improving credit, or establishing a solid employment history in order to qualify for a loan.
This is why it can be helpful to do a bit of preparation before you consider buying a home. Even if you’re not quite in a place to buy a home, it can help to know what you may need to do when you decide it’s time for you to buy a home. That way, when you decide to buy a home, you’ll have taken the necessary steps.
In this post, we’ll cover 4 things you should do before applying for your first mortgage. These actions will help make applying for a loan easier when you decide to buy a home.
Take Care Of Your Credit
We probably don’t need to tell you that your credit matters when you consider applying for a mortgage. Credit is crucial to mortgage loan approval. Poor credit could cause you to pay more for your loan that you have to or it could make getting a loan altogether impossible.
Checking in on your credit is essential before you think about buying a home. There are various ways that you can check on your credit score so that you can see where you stand. Here are a few easy ways to check in on your credit score:
- See if your credit card offers this service. Many credit card companies offer some kind of credit score on a monthly basis. Discover and Capital One both offer this feature.
- You are also able to check your credit score once per year at AnnualCreditReport.com.
Regardless of where your credit stands, there are a few simple ways to help maintain your credit score. First and foremost, pay your bills on time. It can also help to minimize your debt by paying off your credit card balances every month. While you’re working on maintaining your credit, avoid applying for any additional loans or credit cards, they can ding your credit every time your credit is pulled.
Manage Your Debt
Minimizing debt will make applying for a loan much easier. Even before you think about buying a home, it can help to pay down your current debt and avoid accruing additional debt. Not only will it help your credit score, the lower your debt to income ration, the more home you’ll be able to afford.
The use of credit is a double edge sword. To build good credit, it is important to show that you’re able to responsibly use debt, however, you don’t want to overextend yourself.
Generally, it is best to use less than half of your credit card limit to maintain a good credit score. For example, if you have a total credit card limit of $10,000, you shouldn’t spend more than $5,000 of your overall credit at one time.
Save, Save, Save!
Saving is also important before applying for a loan. This may be one of the hardest parts of applying for a loan. It can be hard to cut down your budget in order to stow away additional money in savings. Saving can also be hard because you don’t necessarily know how much you need to save.
Take a look at your monthly budget. Is there anything you can cut? Is there a gym membership or TV subscription you never use? Cut the items that you barely use or that are an unnecessary expense. Do you have a small spending habit that quickly adds up? Lunches out or morning coffee can seem small by itself but when you’re doing it a couple times a week it can quickly add up to a large spending habit. Oftentimes, you can cut these unnecessary items and barely notice the difference.
Saving can be hard, but it’s essential to take of before you consider applying for a loan. A mortgage company will want to see that you have a few months reserves in your bank account as a safety net.
Keep Your Day Job
Finally, keeping steady employment is important as well. Generally, mortgage companies want to see that you’ve had two years of steady employment history. This doesn’t necessarily mean you would need to be at the same job for two years. It’s often acceptable to have been employed in the same field for two years.
In addition, steady employment is also important for proving income. For those who make bonuses or commission, you’ll need to show at least two years worth of income for bonuses or commission to count.
Establishing a steady employment history will be important when it comes time to apply for a loan. Even if you’re not currently thinking about buying a home right now, having established a job history will help you when it comes time to finally buy a home.
Are you thinking about buying your first Knoxville home this year? Please let us know if there is any way that Knoxville Home Team can assist you. Rick can be reached at 865-696-9002 or via email at Rick@KnoxvilleHomeTeam.Com or by phone at 865-696-9002. Kati can be reached at Kati@KnoxvilleHomeTeam.Com or by phone at 865-392-5880.
You can also start your home search off today on our Knoxville Home Search Page.