Buying a new home is a major undertaking that impacts both your lifestyle and your finances. Often, applicants worry about their ability to get qualified. Another common concern is affordability. Typically, a mortgage payment is the household’s largest single expense, so taking out a home loan should not be taken lightly. By completing these three steps today, you can enjoy a higher level of confidence when submitting your mortgage application.
Check Your Credit Report
Your credit scores directly affect your chance for loan approval. In addition, your interest rate and mortgage terms can be decided at least in part by your credit report. The three credit bureaus, which are Experience, Equifax and TransUnion, are required to provide a free copy of your credit report annually upon request. Take time today to review your free credit reports from each of the bureaus. Be aware that not all creditors report the same information, so all three bureaus need your attention. If your scores are low, take steps to improve in this area before applying for a mortgage. If you object to information on the credit report, contact the bureaus directly.
Use a Mortgage Payment Calculator
Often, homebuyers rely on a listing brochure’s mortgage analysis to gauge affordability. These brochures as well as online listings estimate the mortgage payment with blanket terms. For example, the advertised payment may be for a 25% down payment and an interest rate only available for the best credit scores. Home buyers cannot rely on these generic payment estimates. Instead, you can more accurately estimate your mortgage payment before applying for a home loan using an online payment calculator.
Analyze Your Budget
With a realistic mortgage payment estimate, the next step is to analyze your budget. Plug that figure into your budget as a replacement for your current rent or mortgage payment. Factor in changes to utilities costs, commute expenses, HOA fees and property maintenance. Ensure that ample funds are available to meet your savings goals and to fund the lifestyle that you are accustomed to.
Consult with a Mortgage Professional Today
An alternative to using a mortgage calculator is to contact a home loan specialist directly. This professional can complete a pre-qualification, but there is no hard credit pull. This means that your credit score will not decrease simply by exploring your options in greater detail. After you understand your home loan options, you can more confidently make an offer on the home that interests you.