There’s a lot that goes into buying a house. Think about the amount of time you’ve put into looking for that perfect abode. And don’t forget about all that effort that your real estate agent has dedicated to helping you find a home, wheel and deal with the seller, and draft up that detailed purchase agreements.
But there are other professionals working diligently to help you realize your dreams of becoming a homeowner: your team at Dave Financial. Our job is to assess your finances, gathering up all the necessary documentation, find the right mortgage product for you, and work with the lender that will provide you with the best rate and options.
After 17 years of serving our clients, here is a brief cheat sheet that will help you succeed as we work together….
Don’t Make Any Major Financial Changes
After the mortgage process has started, the worst thing you can do is make large purchases on credit. Whether you’re thinking about taking out an auto loan or financing brand new living room furniture, you’d be well advised to wait until after everything has been settled with your mortgage application process before making such major financial moves.
Why? Any large purchases on credit will affect your credit score and have a significant impact on your debt-to-loan ratio that plays a key role in whether or not a lender chooses to approve or deny your mortgage application. At the very least, such a move could delay closing.
Don’t Make Changes in Your Employment Status
Similar to putting a hold on making major purchases until after closing, it’s recommended to do with same when it comes to your job. Your employment status, position, and income play a crucial role in the mortgage process. Brokers are working with the information you’ve provided about your job and the amount of money you bring in.
If you make any changes – such as starting a new job or quitting altogether to start a business – this could throw a big wrench into the process. At the very least, it will just postpone your closing date. And the worst case scenario? You could be flat-out denied a home loan.
Be Prepared to Supply a Lot of Documents
When you’re applying for a mortgage, get ready to submit more documents than you ever had to before in your life. From pay stubs, to tax returns, to information about your investments, almost nothing is off limits. While you might feel very exposed by handing over paperwork with such pertinent information, it’s all part and parcel of the mortgage application process. Having all this paperwork easily accessible will make both your job and and our job much easier.
Have at Least a 5% Down Payment to Put Towards the Purchase
Sure, there are programs out there that allow borrowers to put down as little as a 3.5% down payment, but you’d be better off coming up with at least 5% towards the purchase price of your home. Conventional mortgages call for a minimum of a 5% down payment. The more money you can come up with, the better the odds of getting approved for a mortgage. Not only that, you’ll have a smaller loan amount to have to pay back.
It should also be noted that you will need to come with at least a 20% down payment in order to avoid paying private mortgage insurance (PMI) which essentially protects the lender should you fall short of making your monthly payments. PMI usually costs anywhere between 0.5% to 1% of the entire mortgage amount annually. If you are a veteran or active military, you will not have PMI even if you come in with $0 down. Please let us know if you have a military background.
Talk with Dave Financial Early
There’s no sense in pounding the pavement in search of a home in the $500,000 range when you can only realistically afford a home in the ballpark of $300,000. By paying a visit to us, you’ll be able to identify what this number is so you can focus on homes that you can afford. Not only will this make your real estate agent’s job easier, it will also help you avoid getting disappointed when you fall in love with a home that’s way out of your price range.
Budget For Closing Costs
In addition to your mortgage and down payment, there are plenty of closing costs that you will be obligated to pay, including fees for title insurance, mortgage application, property taxes, and home inspections, among others. These can add up to be anywhere between 2% to 4% of the purchase price of your home, so be sure you budget accordingly.
The Bottom Line
The team at Dave Financial will work diligently to help you get approved for a mortgage with the best terms possible. Following the guidelines above will make your life (and ours) a little bit easier. Thank you for considering us part of your team as we work together towards with the common goal of helping you achieve home ownership.