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Real Estate Mortgages Preparation

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Preparation is key to applying for a Real Estate mortgage

June 25, 2012 – With housing prices and mortgage interest rates at record lows, conditions are good for a home purchase. “Buying a home is the single largest investment that most people will make in their lifetime,” said Frank Keating, president and CEO of the American Bankers Association (ABA). “An honest evaluation of your finances and thorough planning for a mortgage are essential to a wise buying decision.”

But it’s harder to get a mortgage these days. ABA offers these tips to help households prepare for buying a home.

Review your finances. A detailed analysis is central to the buying decision. Calculate all of your fixed monthly expenses. Include a potential mortgage payment, homeowner’s insurance, taxes and condo fees. Also include obligations like car payments, credit card debt and living expenses. Add home maintenance costs as well.

Check your credit score. Your credit history is an important factor when applying for a loan. Most lenders rely on the Fair Isaac Corporation (FICO) credit score when reviewing a loan application. The score reflects how well you manage debt and is calculated using data from your credit report. A lower credit score will result in a higher mortgage interest rate; if it’s too low, you may not be approved for a loan at all. There are ways to improve a credit score over time, however, such as paying bills on time, only opening lines of credit you need and keeping credit card balances below half of your available credit.

Organize your finances before you go to the bank. Getting a loan requires documentation including, but not limited to, pay stubs, tax returns and financial statements less than 60 days old. Provide copies of additional monthly payments such as car loans, credit cards and student loans.

Factor in closing costs. Once you sign a contract to buy a home, expect additional “closing costs” when it’s time to make the purchase. The costs vary depending on the purchase price, contract details, and whether a real estate attorney or title/escrow company is involved in the transaction. By law, lenders must give you a written estimate of closing costs within three days of accepting your loan application

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