Buying a home is a big decision, but paying for a home is an even bigger deal. Naturally, if you're looking at purchasing a home in the Dallas-Fort Worth area, then you'll most likely be looking toward a mortgage to finance your home purchase.
The mortgage process is complex, multifaceted, and became even more so since the housing crash from a decade ago, so our real estate agents have put together some tips to help you understand the mortgage application process.
- Applying for a Mortgage
First things first, regardless of who you end up going with as your lender, you need to apply for a mortgage. Most mortgage applications can be filled out online from your lender of choice, and some online services offer a "catch-all" mortgage application that can be submitted to multiple lenders saving you a lot of time. After all, most mortgage applications take 45 minutes or more to complete and submit!
Once you've applied, your lender will likely give you pre-approval or pre-qualification for a certain amount of funds. In other words, based on what you provided in your mortgage application, the lender will give you a fair ballpark of how much they can lend you. From there, you can budget and shop within that price range.
- Get Your Documents Ready
As you're working through the mortgage application process, your lender will want to see quite a few financial documents to prove your financial standing. Your lender will want documentation proving your monthly or annual income, the total of all of your debt obligations, your credit score, how much you can use for a down payment, and what you can afford in a home.
Prepping these items early in the process will give both your lender and yourself a good picture of your financial standing and allow either one of you to make adjustments to financing as needed.
- Clear Up Debts
One thing that your lender will be looking for is your income to debt ratio. In other words, how much do your current liabilities weigh on your gross income? If you're preparing to buy a home and you haven't started the mortgage process, or if you're just trying to prove your position as a worthy borrower, then pay off any small debts.
Small debts such as credit cards, small amounts in collections, or car notes that you can clear up will improve your position as a borrower worthy of a mortgage. Additionally, clearing up any unnecessary debts will improve your credit score and give lenders more confidence in you.
- Credit Score
Your credit score will say a lot about you as a borrower. Credit scores effectively give lenders a numerical value of your creditworthiness and your overall risk as a borrower to them.
A FICO score is usually the number that most lenders and credit companies use to compare a borrower's creditworthiness. FICO takes into account debts owed, how long they've been owed, and how frequently you make payments on those debts among other things. Getting rid of small debts or paying down loans will help improve your credit score.
Buy a Home in the Dallas-Fort Worth Real Estate Area
If buying a home is part of your plan for 2019, and you're looking to settle in the Dallas-Fort Worth Metroplex, then contact us today. Our agents at RE/MAX DFW Associates have an ear to the ground in the Dallas Fort Worth housing market and can help you find the home that's right for you.