Buying a home is one of the happiest days one will experience. Research shows that 560,000 homes sold in the United States in 2016. Many potential buyers will need to qualify for a mortgage before this day arrives. It is understandable to feel overwhelmed at how to receive a mortgage. However, following a few steps will have you well on your way to buying that new home of your dreams. Here are three items that should be looked at before applying for a mortgage.
Prepare Required Documents: You will first need to have a few documents prepared. Each lending institution will have different rules pertaining to what documents you will need. In most cases, items like tax returns and pay stubs will need to be presented. Lenders will want to have a good amount of financial information to know what category of risk you would fall under.
Pay Off Outstanding Debts: You might not be able to entirely pay off your debts which is fine. However, many lending institutions go by a 28/36 rule for mortgages on homes. This rule states that a mortgage payment should be no more than 28% of total monthly income. Also, your debt should not be more than 36% of total monthly income. This rule isn?t set in stone but not going over these percentages only improves chances of application acceptance.
Have Information on State Home Discounts: This item is easily taken care of through a real estate agent. These professionals are aware of what programs will help you qualify for houses you like. One study found that 78 percent of recent home buyers felt their agent was an extremely useful information source. Some states will offer assistance programs or drastically lowered interest rates to bring in new buyers. A real estate agent will know how to help find you the right discounts or incentives.
In closing, there are several things to take care of before applying for a mortgage. You will want to have all documents prepared, as set forth by the lender. You might want to consider paying off smaller debts. The more debt you have, the less likely you are to qualify for a mortgage. One study found that 32 percent of home buyers are purchasing their first home. A real estate agent will be helpful at informing you of any local programs that will help you, especially as a new buyer.