Follow These Simple Tips to Prepare for a Mortgage

Buying a new home is an exciting process—whether it’s your first one or the next one. Going out and looking at different houses, exploring the different neighborhoods of Alpine, TX and working with your realtor are all fun, adventurous activities. And when you’ve found the home you love, there’s no better feeling.

Unfortunately, things can take a turn for the worse when it comes to the mortgage underwriting process. If you’re not prepared to deal with the bank, the entire experience could sour. You might not be able to get the interest rate you want. There might be extra hoops to jump through before you can sign for the mortgage loan. You might even be denied! All this, because you weren’t prepared for the financial side of homebuying.

Don’t let the mortgage process keep your dream home out of reach. Follow these simple mortgage preparation tips and make working with the bank as simple as possible:

  • Boost your credit score: Before you go out and start actually looking at homes, check your credit score. Bad credit is the fastest way to derail the homebuying experience. If you’ve got a score in the middling 500s, it’s going to hurt your chances of getting a loan with great terms. Aim for the mid-700s or higher to get as much borrowing power as possible—including great terms. Fixing your credit score is tough, but not impossible!
  • Pay off debt: If you have any bad debt—like credit cards or unpaid fines—it’s best to clear these things up before talking with the bank. Your personal balance sheet should show minimal debt and paint a picture of fiscal responsibility.
  • Don’t make big purchases: The last thing the bank wants to see before you apply for a mortgage is a huge purchase for something else—especially a discretionary purchase. In this same vein, don’t open any new lines of credit right before you apply for a mortgage.
  • Get preapproved: Preapproval is the bank’s way of making sure you’re a creditworthy borrower and confirming it with you. They’ll provide you with a piece of paper that says “we’ll approve you for a mortgage of up to $X.” It shows sellers your buying power, so they can feel confident in negotiating with you. It also lets you, the buyer, know where you stand before the actual underwriting process begins.
  • Know your budget: Just because you’re preapproved for $X doesn’t mean you can afford to spend that much on a home! Use a mortgage calculator to figure out what you can reasonably afford based on your household income, and factor in the tentative interest rate your bank provides. Consider things like property taxes—for example, if you’re looking in Alpine, TX, you’ll need to look at property tax rates for Brewster County.

It’s a good idea to start thinking about mortgage preparation tips three to six months before you plan on buying a home. This gives you enough time to start working on presenting yourself as the picture of fiscal responsibility—someone ready to own a home in the eyes of the bank. Reach out to Carpenter Real Estate for more tips.