Tips To Prepare For a Mortgage Application

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Peoples Home Equity offers a few tips on what prospective mortgage applicants should do before they apply for a home loan.

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try to dedicate more money from each paycheck on paying off debt sooner

Peoples Home Equity knows applying for a loan can seem intimidating. However, the process is quite simple; one just needs to be prepared before applying for a loan.

By following a few simple tips one could be confident in their mortgage application.

1. Check the credit history
One must make sure their financial history is in order. Many times home loan applicants are surprised to find that there is an error on their credit report. This is often after the lender has run their credit history. Unfortunately, once an error is discovered, it usually takes 30 days to repair which means the applicant must wait a month before the lender can pull the credit report again in hopes that the error is gone and the score is higher. One error that is common is when a person is the secondary authorized user of a credit card. Young first-time home buyers run into this problem if they are authorized to use their parent’s credit card. A credit agency may mistake the young authorized user as a person responsible for the balance on the card. If the card carries a high balance and the error is not fixed it can severely affect ones score thus risking a higher mortgage rate or worse, being denied a loan. Peoples Home Equity strongly recommends making sure this first step is completed before submitting a home loan application.

2. Make sure the numbers add up
Prospective home buyers should know the numbers very well regarding how much money they can borrow, what price range of home they can afford, and what their monthly mortgage payment would be. Peoples Home Equity offers a range of calculators to answer any financing concerns one may have. For example, by using the “How Much Can I Borrow” tool, a couple applying with a combined gross income of $80,000 at a 4% interest rate, with $1,500 in monthly debt obligations, bidding on a home with property taxes of $2,500/year should be allowed to borrow up to $139,000 or $666.67 monthly payment. If one just wants to focus on the monthly payment, a good rule of thumb is that for every $50,000 in loan size at a 4.5% interest rate the monthly payment is $250.

3. Pay down debt other debt obligations
Peoples Home Equity knows that cash is often king and required as a down payment on a home. However debt is burdensome and can affect the rate and eligibility of a mortgage applicant. One does not need to spend their cash to lower their outstanding debt obligations but instead try to dedicate more money from each paycheck on paying off debt sooner. Lenders like to see responsible lien holders; do not miss any monthly payments on credits cards, student loan, auto loan, etc. A steady reliable payer has a high chance of being approved for a home loan.

If interested in purchasing a property and are in in need of a mortgage, consider speaking to a Peoples Home Equity loan officer today at: 262-563-4026

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Giorgio U Ferrero
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