Advance For Your Mortgage
If you are
planning on applying for a mortgage or purchasing a new home it is best that you begin to prepare
at least three months in advance. The better prepared you are the better mortgage and interest rate you will receive.
First, make sure your credit history is being reported accurately.
Don't be fooled or ripped off by companies that will charge you
a lot of money and promise to remove negative credit from your report.
You cannot remove accurately reported information. But, you can
make sure what is there is correct. And there are ways to improve
your score. The section on credit repair goes into greater detail
and will show you how to do this. Remember, You can do it yourself.
FUNDS TO CLOSE
The money you are going to use for your down payment and closing
cost typically have to be sourced and seasoned for three months.
If you already have your money in an institution (bank, CD, 401k,)
you are ok. However, if you have $20,000 under your mattress and
intend to buy a house with it today, you would be turned down. Lenders
must see that you have had the money for three months, they must
see where it came from. So, put the money in the bank and leave
it there for three months. Some loan programs will allow a gift.
(FHA and a few non-conforming lenders) However, even the gift must
be sourced and seasoned in some cases. The are a few programs that
do not source and season funds but the interest rate is considerably
If you are renting your home or apartment, ALWAYS pay by check.
It is the only way you have proof that you paid on time. Some loan
programs require twelve months cancelled checks! I have seen people
turned down because they can't produce 12 cancelled checks. Money
orders usually will not work. And of course, Always pay on time.
The same applies here as rent payments, ALWAYS pay by check. If
a lender miss-reports your payment history, cancelled checks are
the only way to correct it. Or if your mortgage is with a private
party the cancelled checks will be mandatory.
Calculate your debt to income. If it is a little high, pay off some
of your smaller bills. Installment loans are not counted if you
owe less than 9 payments. Revolving accounts (department stores) must actually be closed
or the minimum payment will be used to calculate your DTI even if
you have a 0 balance. Lenders don't like to see a lot of revolving
accounts. Get rid of them. It will also increase your credit score.
COLLECT YOUR DOCUMENTS
You will be required to bring to your broker the following documents.
They cannot even start your loan without them and they must see
the originals so don't bother making copies, your loan officer will
do that for you. Don't leave the originals with them. You will need
to collect: 3 months bank statements, all pages, all accounts. Last
2 years W2's and or complete tax returns if you are self employed
or paid on commission. One full month of pay stubs from your job.
Divorce papers. Bankruptcy papers. 12 months cancelled checks if
your rent/mortgage is paid to a private party. There may be other
documentation requirements depending on the type of loan and your
Change Jobs. Open any new accounts. Be late on any payment. Have
any NSF checks show up on your bank statements.
Make your mortgage payment on time! ... No matter what your loan officer tells
you, or when you think your new loan is going to close, MAKE THAT PAYMENT. Anything
can happen. If your loan is delayed, and your payment shows up
late not only will your credit suffer, but you may no longer qualify
for the new loan.
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