Information Needed For Loan Application
The day of closing you will need two forms of identification for the attorney. If you are bringing funds to the closing, you will need to bring CERTIFIED FUNDS. You may bring a cashier’s check or money order or wire the funds from your bank to the attorney.
How Much Can You Afford?
Being aware of how much you can afford is one of the most important rules of home buying. Depending on your individual situation, your budget can affect everything from the neighborhoods where you look, to the size of the house, and even what type of financing you choose. A general guideline to consider is that most buyers purchase a home that costs about 1 ½ to 2 ½ times their current annual income.
To be sure your financial situation is order and to be in the best negotiating position once you find the right home, you should become pre-qualified with a mortgage lender. The lender will discuss the best type of financing for your needs and will give you a Good Faith Estimate. This will show the breakdown of the total cost (including down payment, closing costs and prepaid items) you will need to invest in a home. This estimate will also show you the interest rate and total monthly investment including taxes and insurance.
The lender will review your financial information and will be looking for two very important numbers:
Lenders may be more lenient with their qualifying ratios if you make a larger down payment. A down payment of 20% or more will also exempt you from the mortgage insurance premium usually added to the principle, interest and taxes on loans with less than 20% equity.
Once you have been qualified by your lender, you will receive a Pre-approval letter stating you have been pre-approved for a certain amount. You are now in great negotiating position since you are now a qualified and pre-approved buyer - something every seller wants to know!
7 Ways to Improve Your Credit
If you understand your credit score, you'll be able to secure competitive mortgage rates. Credit scores, along with income and debt load, sum up how well a person has managed credit and whether the person represents a good risk for a lender. The most common credit-scoring model used today is Fair, Issac & Co.'s (FICO). The big three national credit reporting repositories – Equifax, Experian, and TransUnion – rely on it. The scores typically range from 300 to 850, with a higher score indicating a better credit risk. A score of 720 earns you a gold star.
To improve your score:
- Wait 12 months after credit difficulties to apply for a mortgage. Some items are scored less heavily after 12 months.
- Don't order home furnishings or appliances during the mortgage application process. The balance owed will be counted as debt.
- Pay back taxes in a lump sum to reduce overall debt.
- Avoid finance companies which charge high fees and rates. Their use is considered indicative of poor credit management, even if the borrower pays the loans back on time.
- Shop for rates all at once. Multiple inquiries from the same type of lender are scored as a single inquiry if received within a short time period.
- Don't open a lot of credit card accounts quickly to build a credit record. Doing so lowers the average account age and looks risky to the scoring model.
- Pay down credit card balances. However, offloading credit card debt to a new card with a lower interest rate isn't considered good credit management and also results in another credit inquiry that will lower you score.