Advice for New Home Buyers

Your credit score isn’t the only thing that decides whether or not you can get a loan, but it is important and determines what you’ll qualify for. Here are some things you should do:

• Know your credit score before meeting with a lender. You should at least have this knowledge beforehand.
• Verify the accuracy of your credit report. If you find any errors, dispute them with the credit bureau as soon as possible. Unresolved disputes can lower your credit score and might delay your loan being approved.
• Pay down high balances. Having lower balances (and a better ratio of available credit) can have a positive effect on your credit score. A few points might be the difference between Very Good and Excellent credit!
• Set up payment plans for delinquent accounts. If you have any delinquent accounts, work out a payment plan with your creditors that doesn’t have a harsh effect on your debt-to-income ratio, but still demonstrates that you are serious about meeting your financial obligations.

There are a lot of terms relevant to the mortgage process that you may not be familiar with prior to speaking to a loan officer. Learning some of them before you do can make the conversation easier to follow and more productive, and help you make more informed choices. Take a look at our Mortgage Glossary where we’ve defined many of the commonly used terms.

Start with your income, then calculate all of your expenses, such as:

• Monthly bills
• Cost of living (this includes food and entertainment)
• Projected property taxes
• Estimated homeowner’s insurance
• Estimated private mortgage insurance, if applicable
• Potential Homeowners Association fees, if applicable

Don’t forget that the buying process does also include some one-time costs including the down payment and closing costs.

Traditional lenders may not qualify you for a mortgage unless your debt-to-income ratio is less than 43%. You can change this ratio either by paying down debt or increasing your income. For most people the first option is easier, so start paying down your credit balances. However, don’t close the accounts when the balances are paid off! Available credit is good for your credit score.

Everybody wants to save money. Saving money on your interest rate is certainly important, but it’s not worth it if you wind up working with a company that isn’t reputable. Great Northern Mortgage has been in the business for many years, Find Out More About Us and see why we’re a mortgage broker you can trust to help you find a mortgage that’s right for you.

It’s much easier to get prequalified, but pre-approval signals to sellers that you are ready to make a deal happen and can give you an advantage if you are in competition with other potential buyers when you find a home you want to purchase.

• Pre-qualification is a paper from your lender which is based on your over the phone conversation with the loan originator, pulling your credit but without reviewing your other documents. This is not the most effective way to start your mortgage process.
• Pre-approval is when you talk to your loan originator and complete your loan application, your credit is checked, you submit all required documents and these documents are reviewed.

The latter will allow you to set a budget and negotiate with sellers confidently. Realtors and sellers will take you more seriously if you have a pre-approval.

You want to work with a real estate agent you can trust. Look for someone who has experience, is familiar with the area you’re house hunting in, and who is looking out for your best interests. It helps to have a referral from friends, family or a trusted professional if you can get one.

Talk to a few real estate agents, and ask them some questions:

• How long have you been in real estate?
• Is real estate your only line of work?
• Have you sold any homes in the area I’m searching?
• How many homes have you sold in the last year?
• Will you attend the day I close my loan?

Location is the one thing you can’t change about a house. It’s easily as important as the condition of the house you’re buying. Consider commute times, school districts, etc., when evaluating a house.

Try to avoid making major purchases (like a car), making untraceable deposits into your bank accounts, or changing employers while you are in the loan process. All of these can hold up the approval and cause delays. If any of these things are unavoidable, talk to your loan officer.

You won’t know what you’re getting into when you’re purchasing a home unless you’ve had it inspected. A thorough inspection may also provide you with some negotiation leverage that can get you a lower purchase price or additional services in your contract.

Don’t rely upon verbal agreements with a seller. If they promise to fix a leaking roof or leave behind kitchen appliances, make sure this is included in writing in any agreements you sign. Otherwise the seller is not obligated to fulfill any promises. Make sure as well that all the details of your loan are explicitly stated in writing, including the amount, payments, rate lock and other details.

All of the various considerations to keep in mind when buying a home can seem like a lot at first, but with the help of trusted professionals, including your mortgage broker, you’ll be able to proceed confidently knowing that you have someone to fill in the gaps in your knowledge as you go. Great Northern Mortgage is happy to answer any of your questions, any time. Contact Us, we’re here for you.