How to Prepare a Mortgage
- 1). Find and make copies of the financial paperwork that a mortgage lender or bank will eventually use to determine if your gross monthly income is high enough for you to afford the additional financial burden of a monthly mortgage payment. Lenders prefer to work with borrowers whose monthly debts, including their estimated new mortgage payments, total less than 36 percent of their gross monthly income. Copy your most recent federal income tax return, last two months of paychecks, savings and checking account statements, credit card bills and other loan statements.You'll be prepared when your lender asks for them.
- 2). Build a strong credit record before applying for a mortgage loan. This takes time, but if you make a habit out of paying your bills on time and cutting your revolving debt, your three-digit credit, or FICO, score will gradually rise. The higher your FICO score, the better; if it's higher than 720, you'll qualify for the lowest interest rates, and, as a result, the lowest monthly mortgage payments.
- 3). Ask your employer to write and sign a short letter outlining how long you've worked at your current place of employment. Lenders like to work with borrowers who have held the same job for three years or longer.
- 4). Save a significant amount of cash for a down payment. Most traditional lenders require that buyers provide a down payment of 20 percent of a home's purchase price. However, you can find lenders willing to accept down payments of as low as 5 percent of a home's purchase price, if you shop around. If you take out a loan insured by the Federal Housing Administration, you'll only have to provide a down payment of 3.5 percent. If you qualify for a loan insured by the U.S. Department of Veterans Affairs---you'll need to have served in the military or be serving in it now---you are not required to come up with any down payment.
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