Houston Mortgage Guide: Mortgage Pre Approval Checklist
There’s been a lot of changes in the mortgage market over the last few weeks – especially in the “jumbo” loan mortgage.
In the last week, one of my clients (who was already pre-approved for a mortgage) found their interest rate jumped by 1.00% and the origination fees increased dramatically.
They’re moving to another mortgage provider, but this situation highlights the importance of getting your finances in order to get the best rates and conditions possible.
When you are ready to buy a home, one of the most important things you can do is ensure your finances are in order before you’re ready to buy. This can save you .75% – 2.00% on your mortgage – which can translate to tens of thousands of dollars in savings over a typical mortgage.
This should be done before anything else, as it will provide you with a general idea of what you can afford for a down payment and most importantly, it will give you a better sense of how much home you can afford.
There are a few steps that you can take to make sure that you fully understand your financial situation and to make repairs in areas that need it.
1) Set your budget. Many people create budgets and end up not following them because they are not realistic. To prepare a realistic budget, gather receipts for six months and then total them up to see where you are spending money.
It’s easy to budget for things such as rent and car payments but there are always unexpected items, such as car repairs or illnesses that have bills attached to them and it’s essential that these items be included for a realistic financial picture.
2) Along with creating a budget, make sure you know exactly where your money is going. By looking over expenses for one month, there are probably many items that don’t need to be purchased. Lottery tickets, daily cups of coffee, and other small items can really add up quickly and can be a great money saver if they are eliminated from the expenses.
3) Limit your debt as much as possible. Most lenders will be more open to give a loan to people who have debt less than 36 percent of their total income. The mortgage will be included in this figure and the mortgage alone will generally be 26 to 28 percent. This only leaves 10 percent for other loans such as car loans, outstanding credit card debt, and any other type of debt.
4) Understand how much you can afford to put as a down payment. Usually lenders will only ask for a 5 percent down payment. However, the more you put down, the less the mortgage payments will be and you may end up with a lower interest rate. Aiming for a 20 percent down payment will generally serve you best in the end.
5) Make a house fund part of your monthly expenses. Sometimes putting away whatever you have left at the end of the month will often be an amount of zero. Decide on a number and stick to it.
6) Make sure you have good credit history. Eliminate bad history by paying off debt and if you have no credit, get a credit card and make the payments on time. This will help when lending companies are considering giving you a loan.
Please contact me if you’d like a recommendation on good Houston mortgage providers who are very responsive and have been aggressive with their terms and rates or if you’re interested in search Houston TX Homes for sale.
