With housing prices and mortgage interest rates at record lows, now is a good time to explore buying a new home. Preparation is key to applying for a mortgage, so here are some tips from the American Bankers Association (ABA) to help you prepare for buying a home.
Review your finances. A detailed analysis of your financial situation is central to the decision to buy. Calculate all of your monthly expenses, in addition to your potential mortgage payment, homeowner’s insurance, and taxes. Factor in car payments, credit card debt, and living expenses. Budget for home maintenance costs as well. Aim to keep the mortgage payment and all other obligations below 40% of your monthly income and stay within your budget when considering homes.
Check your credit score. Your credit history is an important factor when applying for a loan. Most lenders rely on the Fair Isaac Corporation (FICO) credit score when reviewing your loan application. The score reflects how well you manage your debt and is calculated using data from your credit report. A lower credit score will result in a higher interest rate on your loan.
Organize your finances before you go to the bank. Getting a loan requires a few different documentations including pay stubs, tax returns, and financial statements that are less than 60 days old. Provide copies of additional monthly payments such as car loans, credit cards, and student loans.
Factor in closing costs. Once you have found a home within your budget and agreed on a purchase price, there will be costs associated with closing the sale. These costs can vary and will depend on the purchase price and whether a real estate attorney or title/escrow company will be involved in the transaction. By law, lenders are required to give you a written estimate of closing costs within three days of accepting your loan application.
The experienced staff at CNB can help you navigate the process and help you choose the best mortgage option for you. To begin, you may complete a mortgage application online or if you need more information, please contact a CNB Mortgage Lender at 888-322-1088 or 517-439-0440.