1. Know Your Credit Score.
Your credit score will not only help to qualify you for a mortgage, but will also play an important role in determining the interest rates a lender may offer. A very good score, which is considered to be 720 or higher, will help make your monthly mortgage payments more affordable, while a lower credit score will mean higher interest rates.
2. Keep your documents organized.
Buying a home can take time but knowing the documents you need and where to find them can help move the process along. Mortgage lenders will want a full understanding of your financial situation. To do this, they will likely request two recent paystubs, W-2 forms from the last two years, tax returns and the last two months of bank statements. Have these documents ready to go and you’ll be one step closer to getting approved for your mortgage.
3. Spend your money wisely.
Lenders need to see that you’re financially responsible. In addition to the documents listed above, they’ll want a paper trail of your recent spending history. Opening too many credit cards or making large purchases can threaten your credit profile and will make it more difficult for a lender to approve you for a mortgage.
4. Figure out your downpayment.
Most potential homebuyers will need at least a 3.5% down payment but putting down a larger down payment will mean saving money in the long run. A 20% down payment will not only knock down your mortgage balance, but it also alleviates private mortgage insurance (PMI). PMI can potentially add hundreds of dollars to your monthly mortgage payment, making the cost of home-ownership more difficult.
5. Get started early.
Thinking ahead and visiting your lender early on in your home-buying process is the key to making your experience as easy as possible. Your lender can preapprove you for your mortgage, giving you a clear understanding, along with the ability to make a speedier purchase.
Find out more about what Anie Akpe has to say about buying a home in her Z100 Interview.