Many home buyers will complete the preliminary mortgage application process early in the home buying process. For example, some will choose to get pre-qualified for a mortgage before they begin searching for a home for sale. Others will choose to get pre-qualified after falling in love with a home and immediately before submitting an offer. Regardless of when you choose to apply for a mortgage, it is important to think about a few points before taking this step.
Do You Have Enough Money to Close?
It may cost more to close on your new home than you think. For example, you need to estimate for the down payment plus another two to three percent for closing costs. In addition, you will need to pay for third party reports, such as a property inspection and appraisal. Depending on your market, these may cost you a combined $500-$1,000 in some cases. Funds will be needed to establish an escrow account for taxes and insurance, and this may equate to several thousand dollars. Plus, you may also need to prove that you have approximately two to three percent of the sales price available in reserve after these expenses are paid for.
Is Your Credit Rating Good?
Next, think about your credit rating. Your credit rating ideally should be in the good to excellent range in order for you to qualify for the best interest rates. You can pull a free copy of your credit report approximately once a year, and this will give you a better idea about what your credit scores are. If you pull your report and are not pleased with the score or if you notice an error, you should improve these areas before you apply for your mortgage.
Are You Ready to Move Forward?
Finally, consider if you are truly ready to move forward with the loan request and your home buying plans. Have you considered your future and how it relates to buying a new home? Do you feel confident with your career prospects and job stability? If you feel hesitant because of these or other factors, you may consider holding back on your plans to purchase a home until you feel more confident.
Buying a new home is a major financial commitment, and you should feel confident.
If you’re ready to take the next step, we can help. Contact us on our website here.