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What Should You Do Before You Apply for a Mortgage?

Wednesday, November 13, 2019   /   by Suyapa Sauceda

What Should You Do Before You Apply for a Mortgage?

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Before you apply for a mortgage, make sure you’re in a good position to qualify for the best loan possible. Check and improve your credit, compare lenders, get preapproved and make a plan for your down payment and closing costs.

1. Check and improve your credit reportLenders will check your credit report, so you want to identify and fix problems with your credit report before you apply.

Order a free copy of your credit report from each of the three credit bureaus at AnnualCreditReport.com. Your report will list your borrowing history, including any negative marks. You can pay extra to access your credit score with your report. Alternatively, some websites, banks and credit card issuers give customers free credit score access.

Check your report for errors and contact the credit bureau if you find any. You can take steps to improve your credit score, such as always making your monthly payments on time and paying down your balances.

Although improving your credit before applying for a mortgage can help you with approval and better terms, don’t rule yourself out of applying just because you have a less-than-perfect credit score, says Rob Sickler, loan originator with Mortgage Network Solutions. You can make up ground by finding the right lender and putting together a solid mortgage application.

2. Get preapproved. You should get preapproved for a mortgage before you start looking at properties. It can identify how much loan you are likely to be approved for, so you can avoid looking at houses that are out of your range. And it can make you more attractive as a buyer, since a preapproval letter tells sellers your lender is on board.

3. Compare multiple lenders. Don’t sign up with the first lender you speak with unless you’ve researched others. Getting multiple quotes increases the chance you’ll find the best rate for your situation. You can get pre-qualified with multiple lenders to check rates without getting locked into a commitment.

4. Submit mortgage applications within a short window. When you apply for a loan, the lender will pull your credit report and score to evaluate your application. The resulting hard inquiry remains on your credit report for up to two years and may negatively impact your credit score. However, you can minimize the impact on your score by applying for multiple mortgages within a 45-day window. Multiple inquiries for mortgages within that window are treated as a single inquiry.

While a pre-qualification typically only results in a soft pull of your credit, your credit may be hard pulled when you apply for a preapproval, apply for the mortgage and right before the closing. To limit the potential negative impact on your score and increase your chances of securing better terms, you may want to try to shop for a loan in a short period of time.

5. Don’t apply for other loans and credit cards. In the months leading up to your mortgage application, do not apply for any new loans or credit cards. Each application can shave a few points off your score, which could prevent you from qualifying for the best mortgage rates. Hold off until after you’ve bought your home.

6. Don’t spend all your savings on the down payment. Maximizing your down payment gets you closer to owning your home outright. However, you might need to fall back on your savings for repairs or underestimated costs, or if you lose your job.

Often, things go wrong with a house within the first six months of ownership, says Blackhurst. “The house might have been vacant for a few months, which means water hasn’t been going through the pipes. If the seasons have changed, the different temperatures could create trouble for the heating and AC units.”

He points out that you’ll need money for expenses like new furniture, painting the living room and landscaping, in addition to repairs.

You should also budget for property taxes, homeowners insurance, private mortgage insurance, association dues and utilities.


Contributed by: Ashley McNamara from US News Money



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1700 79th Street Causeway, Suite 160
North Bay Village, FL 33141
305-751-6400

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