Buying a home is notably one of the biggest and most important purchases of our lives, and signing on for a mortgage payment can feel daunting at first. There are many important things to understand and contemplate before getting a mortgage. But, if you plan ahead and learn about the process, you can be well on your way to becoming mortgage ready in no time. This article is designed to help you with that!
Key Takeaway
Before beginning the mortgage process, you need to understand your credit score, how much of a down payment you can afford, and what kind of mortgage options are available. It's also important to figure out how much home you can really afford and shop around for the best rates. The more research you do ahead of time, the better prepared you'll be when it comes time to apply for a mortgage.
How to Get Mortgage Ready
Here are a few tips we recommend following when preparing yourself to be mortgage ready:
Get your credit in check- The first important step is to get a free copy of your credit score and report and examine it for any errors or inaccuracies. You can do this by visiting and requesting your report from any of the three major agencies (TransUnion, Equifax, and Experian). Make sure all the information is correct, and if there are any discrepancies take steps to get them corrected.
Save up for a down payment- A large down payment will go a long way in getting approved for a mortgage. Try to save as much as you can so that you have a good amount of money available when it comes time to apply for a loan. Just remember, the more money you can put down, the less you’ll have to pay in interest over time.
Gather your documents- You'll need certain documents that we'll discuss further in the article when applying for a mortgage, including tax returns and other financial paperwork. Make sure you gather these beforehand so that they are readily available when needed.
Find a mortgage lender- Find a reputable lender in your area that specializes in mortgages. Ask around for references and read online reviews to get an idea of the best lenders available.
Understand mortgage types- Before you talk with your lender, it’s important to understand the different types of mortgages available so that you can make an informed decision about what's best for you. Research and compare fixed-rate mortgages, adjustable-rate mortgages, and jumbo loans to figure out which one is the right fit.
Shop around- Once you've determined which type of mortgage you want, shop around for the best rates at different lenders. This can help you get the most competitive rate available and potentially save you thousands of dollars over time.
Read the fine print- As with any contract or agreement, it’s important to read all the fine print before you sign on for a mortgage. This includes understanding the terms and conditions of your loan, such as how much interest you'll be paying over the life of the loan and any other fees that may apply.
Know your rights- Lastly, make sure you understand your legal rights if something goes wrong with your loan and you are unable to make payments. Knowing what steps to take in the event of financial hardship can help you avoid any unnecessary problems down the road.
What are Mortgage Lenders Looking For?
Now that you have a better idea of what it takes to get mortgage ready, let’s discuss the criteria that lenders are looking for when approving someone for a loan.
Credit record- Your credit score is one of the most important factors in determining whether or not you'll be approved for a loan. It's important to keep this in good standing in order to improve your chances of getting a mortgage.
Income- Mortgage lenders also want to make sure that you have a steady income so that you can afford the loan payments. This means having proof of employment and income as well as documentation of any other sources of income.
Debt- Debt is another important factor in determining your eligibility for a loan. Lenders want to make sure that you are not taking on too much debt and can handle the payments that come with a mortgage.
Down payment- As mentioned before, lenders prefer to see that you have saved up a good amount of money for a down payment before applying for a loan. This indicates stability and shows them that you are serious about buying a home.
What Documents Do I Need to Apply?
When you are ready to apply for a mortgage, it's important to have all the necessary documents on hand. Here is a list of what you'll need:
Tax returns from the past two years
Bank statements from recent months
Pay stubs showing your current income
Documentation of any debts or other assets
Do's and Don'ts of Being Mortgage Ready
Now that you have the essential information on how to get mortgage ready, here are some final do’s and don'ts that can help ensure that you are mortgage ready and give you the best chance of getting approved for your home loan:
Do's
Get your credit score and report in order.
Save up for a good down payment if possible.
Shop around for different lenders before applying.
Read the fine print of your loan before signing.
Don'ts
Don’t miss any payments on existing debts or loans.
Don’t take on too much debt or open any new lines of credit before applying for a mortgage.
Don’t apply with multiple lenders at once.
Don’t apply for a loan that you can't afford to pay back comfortably.
The Bottom Line
Getting mortgage ready is a process that requires research, planning, and dedication. However, with the right knowledge and preparation it's possible to get yourself in a position to be approved for a loan. Following these tips and guidelines can help you navigate the daunting mortgage process and help you get the home of your dreams!