Are you hoping to buy a home this year or next? The more intentionally you prepare, the better your experience is likely to be and we have some great mortgage tips to help you prep. Qualifying for a mortgage might seem daunting, but we can walk with you every step of the way and help you find the financing that best aligns with your goals.

If you’re planning to apply for a mortgage soon, check out these mortgage tips for how to best prepare.

Mortgage Tips to Help You Prepare to Buy a Home

Understand Your Financial Situation

Having a clear picture of your financial situation before you apply for a mortgage is key. While we can look at your income, credit score, DTI, and other factors to determine what you are approved to borrow, you also want to be informed about your own financial details so you can confidently set a housing budget. If you do not currently follow a budget, take the time to create a detailed budget that lists all sources of income and all expenses. This will help you understand how much you can afford to spend on a mortgage each month and compare your numbers with the approval amount you get after applying.

Check Your Credit Score

Your credit score is one of the most important factors when you are applying for a mortgage and thus, one of the best mortgage tips is to stay on top of your credit. This number shows us how you’ve handled debt in the past and helps display your ability to take on more debt responsibly.

Here’s how to ensure your credit score is in good shape:

Obtain Your Credit Report: Get a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) at AnnualCreditReport.com.
Review for Errors: Carefully check your credit reports for errors or discrepancies. Dispute any incorrect information with the credit bureau to have it corrected.
Pay Down Debts: Reduce your overall debt, especially high-interest credit card debt, to improve your credit utilization ratio (the ratio of the balance you carry on the account to the credit limit).
Make Payments on Time: Consistently pay all your bills on time, as payment history is a significant component of your credit score. As much as possible, set up automatic payments to make sure you never miss.
Avoid New Credit Inquiries: Refrain from applying for new credit cards or loans in the months leading up to your mortgage application, as multiple inquiries can negatively impact your score.

Save for a Down Payment and Other Costs

Saving is key to prepare for buying a home and often the most common mortgage tip is to make sure you have a healthy savings account and emergency fund established. While you don’t have to save 20% for a down payment, as some people still say, you do need to have cash on hand for a down payment, closing costs, and other expenses. Focus on saving for:

Down Payment: Depending on the loan type and lender, down payment requirements can vary. Aim for at least 20% to avoid private mortgage insurance (PMI), though some programs allow for lower down payments.
Closing Costs: These typically range from 2% to 5% of the loan amount and include fees for appraisal, inspection, title insurance, and other services. Save enough to cover these costs.
Emergency Fund: Ideally, you will maintain an emergency fund with three to six months’ worth of living expenses to cover unexpected financial challenges.

If you’re not sure what to expect for down payment and closing costs, feel free to reach out to us with your questions!

Get Pre-Approved

Qualifying for a mortgage sometime seems like a major undertaking, but getting pre-approved might be easier than you think and obtaining a pre-approval prior to beginning your house hunting is a great mortgage tip to prepare you to make a strong offer. We will gather your financial documents, such as tax returns, W-2s, pay stubs, bank statements, and information on any debts and assets. Then we can let you know how much you’re approved to borrow so you can begin house hunting with confidence.

A pre-approval letter from a lender can strengthen your position when making an offer on a home. It also means you don’t have to wait to get approved for a mortgage after finding a house you want, potentially losing the opportunity to make an offer if another buyer comes along in the meantime.

Understand Your Options

When you get pre-approved with us, we will help you understand your mortgage options. There are many different types of mortgages available, and we can help you determine which one best suits your financial situation and goals:

Fixed-Rate Mortgages: These have a constant interest rate and monthly payment over the loan term, providing stability and predictability.
Adjustable-Rate Mortgages (ARMs): These offer lower initial rates that adjust periodically based on market conditions. They may be a good option if you plan to sell or refinance before the rate adjusts.
Government-Backed Loans: FHA, VA, and USDA loans offer benefits such as lower down payment requirements and more flexible credit criteria.
Conventional Loans: These are not insured or guaranteed by the government and typically require higher credit scores and down payments but may offer lower interest rates.
Non QM-Loans: We specialize in these mortgages, which are designed to work for borrowers who don’t fit the conventional mold.

Want to learn more about buying your first home or learn more great mortgage tips? Contact us any time with your questions or schedule a meeting with one of our loan officers.

Prepare to Buy a Home with These Mortgage Tips