Mortgage tips for a smooth real estate transaction
With turbulence in the mortgage industry including the tightening of underwriting guidelines, some loan programs no longer available and lenders going out of business or unable to fund loans, it’s important to understand what you need to do if you are either considering purchasing a home or are currently under contract.
Getting started:
Find and select a mortgage professional as soon as possible.
Have your credit reviewed and get any errors corrected.
You will be able to obtain a lower mortgage rate with a higher credit score. If possible, work to improve your credit score (legally).
Determine how much you qualify for and know how much money you will need for a down payment, closing costs and monthly payment.
Try to have six months of your proposed total mortgage payment (PITI) in savings in addition to what you need for your down payment and closing costs.
Gather the documentation that will be required from you in order to proceed with mortgage approval.
Learn as much as possible about the home buying/ financing process by taking your time and doing your homework.
Once you’re under contract:
Make sure you loan is approved. Not prequalified or preapproved but obtain a mortgage commitment letter indicating your supporting documentation has been reviewed by an underwriter.
If you are locking a rate, get it in writing. Lock for a long enough time period in case of unexpected delays in closing.
While you are waiting to close, use your credit cards wisely and in line with your previous activity, do not buy appliances for your new home and do not buy a car or boat or spend too much money in general. Act as if your credit will be checked again just prior to your loan funding. Don’t provide your lender with a reason to withdraw loan approval.
If your mortgage is non-conforming (loan amounts over $417,000) and/or a non-traditional mortgage including interest only, reduced documentation, etc., be prepared for a challenging closing.