Getting Your Finances Ready for A Mortgage

The time has come for you to start looking for your dream home, but where should you start? We’ve put together a list of factors to consider and what you’ll need to find the perfect mortgage.

Credit Score and DTI (Debt-to-Income)

First, you will want to check and clean up your credit if necessary. An easy way to do this is by not applying for credit until you’ve closed on your home, and consulting one of our mortgage experts to see if paying off credit card balances makes sense for you.

Also pay attention to your debt-to-income (DTI) ratio. Your DTI is what lenders use to determine how comfortable you’ll be taking on more debt and use it to determine if you qualify.

Determine Your Budget and Down Payment

Dig into your finances to find how much you are comfortable spending on your new home. Start by calculating your monthly income and your monthly debt obligations (student loans, car loan, etc.). From there, determine how much you are comfortable with spending on housing and the other price tags that come with it. Some additional costs that come with homeownership are homeowners insurance, utility bills, and private mortgage insurance, depending on your down payment amount. Which brings us to our next point, your down payment and private mortgage insurance (PMI).

PMI is a fee you pay monthly when you have a low down payment. It protects the lender in the event you are unable to pay your mortgage. With a larger down payment it becomes less likely that you’ll have to pay PMI, which can help you spend less on your mortgage every month.

Getting Pre-Qualified

Once you’ve figured out how much you’re comfortable with spending, it’s time to get your pre-qualification. You will need to gather some documents; make sure you have access to the following documents for all borrowers on your loan:

• W2s from the past 2 years.
• One full month of your most recent pay stubs (2 if you’re paid biweekly, 1 if you’re paid monthly, etc.).
• 2 most recent bank statements. Make sure you include all pages, even blank ones.
• A copy of your driver’s license; front and back.