What to Know Before You Apply For a Mortgage

Whether you are buying a new home or refinancing your existing one, applying for a mortgage is a much more thorough process than it used to be. Here are some simple steps to make things easier on yourself and to help ensure you close on your dream home:

• Find a great lender – An excellent lender is worth his or her weight in gold. The lender will find the most suitable loan program for you, spot problems early on (and work with you to help correct them), and know what you will qualify for and what you won’t. 

• Know where you stand – Pull your credit history as soon as you start thinking about making a home purchase. If anything questionable is in the report you can potentially address it before applying for the mortgage, and if your credit score is on the low side, you will have some time to work on improving it. Ask your mortgage lender for tips on how to improve your score and for other guidance to improve your borrowing position.

• Get organized – As part of your loan application, you are going to need to supply W2s and tax returns, recent paystubs and bank statements. Gathering them together now will prevent scrambling later. Also, if you cannot find your tax returns, you will have time to order them from the IRS.

• Be upfront and forthcoming – Are you delinquent in filing your taxes? Have you been sent to collection for unpaid bills? Is there something else looming that could impact your ability to get financing? The more forthcoming you can be with your lender about any financial skeletons in your closet, the more likely it is that you’ll be able to find a solution to address these matters in a proactive versus reactive manner. It’s better to be upfront from the get-go than keep something hidden in the hopes it won’t be discovered later.

• Choose your home wisely – To successfully get a mortgage, remember that it’s not just about whether you qualify – it’s also about whether or not the property passes muster in the eyes of the lender. If it’s a condo, the lender may want to see an association budget, the condo’s bank statements and the amount held in reserves. They may also need a condo questionnaire completed by one of the trustees, and the building may need to have an owner occupancy minimum or meet other requirements. The property will also be examined to make sure it has no pending litigation or liens against it. Bottom line: Make sure to ask questions about these items when you visit a property. Your real estate broker can also help you obtain this information.

• Prepare for closing costs – Your lender will provide you with your approximate closing cost figures so you can prepare ahead of time. Some lenders also want to see that you have enough funds set aside to cover your future mortgage payments for a specific period of time. Check with your lender on what their criteria is so you aren’t blindsided later.

• Remember it’s not over until it’s over – The lender will contact your employer a couple of days before the closing to verify your employment and salary one last time. Additionally, your credit will be pulled again to make sure you haven’t taken out any additional loans or made other purchases that could potentially impact your ability to pay your mortgage. Applying for new credit cards or other accounts could also have an adverse effect on your credit score. Speak with your lender on what you safely can -- and cannot -- do.

​Author: Donna Charpentier

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