How To Prepare For A Mortgage

You want to buy a house. That’s great! This monumental purchase still seems to be a feature part of the American Dream featured in every Suburban or Horror based movie. Making a decision is far different from acting on it however, and what comes next is not nearly as glamorous as exploring new homes to imagine your life in.

Adding a mortgage to your list of expenses is no small task and needs to be taken seriously. There are a few things that you need to do before a purchase so large as a home.

Check Your Credit

If there is a deal breaker when it comes to applying for a loan, then it’s your credit score. While there’s no good way to truly judge a human being, a credit score is the way a business tries to judge a specific human’s financial responsibility. That’s the closest way to describe a credit score: do you pay off your debts, or do you build on them? When you spend via a credit card, how quickly do you pay that credit back?

Make sure your credit score is on the up and up when you decide to apply for a loan. If you don’t like what you see, chances are, neither will a loan officer, and the loan they offer you won’t have an interest you’ll want to see, either. Taken steps to improve your credit score will make your life much easier, and if all else fails, at least Experian Boost can give you a, well, boost, pretty quickly.

Reduce and Refine

What matters to mortgage brokers is your debt-to-income ratio. They want to know if you can actually afford what you’re asking for, and that means are you bringing in more than you take out. Plenty of people will say don’t make any big purchases when you’re in the process of buying a home, and that’s important, too. Now is not the time to add a new car into the mix. Or a refrigerator. Try slowing down the smaller purchases, too, such as eating out less, renting new movies on Amazon,  or those expensive dog toys that claim to be indestructible. You want your bank history to look pristine when there’s a loan officer judging you.

Flip a Coin

There is a major one way or the other decision you will have to make. How long are you going to give yourself to pay off this loan? When you get a new mortgage, they give you two options that aren’t easily, or feasibly, changed after the fact. It might feel like an attack on your mortality: how will you be spending the next thirty years of your life?

If you choose the other option – fifteen years – then you will be paying a larger amount every month, but the long-term noose on your neck might be a bit more tolerable. It’s just a decade and a half to get through. If you tend to be impatient, maybe that’s the way to go if you can afford an entire house plus interest in that time. Otherwise, you are looking at loan payments for over a fifth of your life.

This decision will have a major impact on the quality of your financial career for the next few decades, so take it with care.

Completing these tasks won’t make the process of buying a house wonderfully simple and stress free, but the will make the process of budgeting much easier in the long run. All that’s left is finding the perfect place.