Have you been thinking about buying a new home in the Prairieville / Baton Rouge area? Maybe it will be your first home!
This can and should be a really exciting time. Before starting to look for a home you will need to be pre-approved by a lender. This is important for a number of reasons. One of the main reasons is that a pre-approval will let you know what price range you need to be looking in. Nothing is worse than falling in love with a property and then finding out you can’t afford it.
Let’s back up a minute… First of all, we need to make sure some things are in order in your financial house.
- Check your credit report for errors.
Did you know that just a few points could make a difference in your rate? A higher rate over 15 or 30 years could cost you a lot of extra money on your mortgage! It is critical for you to check your credit before contacting a lender. If you find errors, this will give you time to clear them up. Also, make sure you don’t have any missed or late payments. Consequently, these kinds of things hurt your credit tremendously!
Eliminate other debt.
Part of what the lender looks at is your debt to income ratio. They have a certain percentage that they consider healthy. Lenders don’t like to see that their potential borrower has a lot of debt. If you have credit cards with balances you can pay off in just a few months, start paying those down. Also, if you have credit cards that are close to being maxed out, start paying those down as well. Please, whatever you do, do NOT open any new lines of credit now or during the home buying purchase.
Establish your income and other assets.
Remember that debt to income ratio we just talked about? Well, here’s where the income part comes in. The lender is going to want to see what your monthly income is and how steady your work history is. If you have been job hopping you may run into some issues. Lenders love borrowers that have been employed in the same place for a significant amount of time. If your job history is sporadic the lender is going to worry about you being stable enough to repay the loan. They are also going to want to see bank statements of all your accounts. Getting those documents together along with prior years tax returns before making an appointment to see a lender will help the process go much quicker.
- Decide how much you are comfortable paying in a monthly note.I always tell my clients to tell the lender how much they are comfortable paying per month for their monthly mortgage note. Telling your lender this will help them identify the price range you need to be looking in. You will probably be approved for more than you are comfortable spending. Just because you are approved for a certain amount does not mean we need to spend that much. If you are a first time home-buyer you will also get the speech from me at your buyer consultation about not spending all your money on your house note and making sure you have extra money to have fun!
Now that your financial house is in order, you are ready to contact a lender to start the pre-approval process. If you are interested in looking for a new home in the Prairieville / Baton Rouge area, Lynn Sharer with Assurance Financial is a lender that I work closely with and she has always done a great job for my clients. She can be reached at 225-717-7144.
In conclusion, if you would like to talk to me more about preparing your finances for a mortgage, feel free to contact me. I’m happy to help make this as easy as possible for you.