Getting a Mortgage These Days

Some may think that it is nearly impossible to get approved for a home loan these days, but with the right preparations, you will make that task much easier. The first thing to be prepared for is that banks are now requiring a down payment and not a down payment that comes from the seller, but from you, the buyer. Banks want to see that you are a serious home buyer with something at risk and a down payment does just that. Have at least 5% of the home sale price ready to go, but it may require more like 10, 15 or even the old standard, 20%. Obviously the more money you have for a down payment, the easier it will be for you to not only get a home loan, but more desirable loan terms and 20% down will help you to avoid PMI. PMI or Private Mortgage Insurance is an additional payment you will be required to make if your home is financed for more than 80% of its market value. The problem is that PMI is not something you can write off on your taxes and so it is a fee that can cost you hundreds of dollars on top of your mortgage, taxes and insurance that has zero benefit. For those of you who do not have 20% for a down payment, be sure to check out FHA.com for down payment grants that do not have to be paid back to a lender. Another important thing to do is to check your credit reports from all 3 credit bureau's and correct any errors, also, know your credit score. Be sure to pull from Experian, Trans Union and Equifax as all 3 can contain different information as well as incorrect information; you will also have 3 different credit scores. The closer to 900 your credit score is, the better and that means a lower interest rate. You can pull your credit reports for free once a year directly from the 3 credit bureaus.

NECESSARY DOCUMENTS FOR MORTGAGE APPLICATION

Make sure to have your past 2 years worth of tax returns photo copied, including your W-2's as the bank or mortgage company will have to verify your income. Also, bank statements are needed to verify down payment funds, and meet reserve requirements as well as to establish your ability to save money by having a nice balance sitting in a savings account, money market or CD. These basic principles can make your experience of getting a mortgage simple and painless. Being prepared is your best offense in these tougher times, so be diligent and aware and you will come out on top. For reference, bankrate.com is a great place to start in finding current mortgage rates and terms so you know what to expect.