Four Essential Steps For A Stress-Free Loan Process
Owning your home is the American dream, and California’s Central Valley has an abundance of affordable housing in the state. Unless you won the $1.3 billion jackpot, you most likely need a home loan, so below are five essential steps to make the loan process easy so you can make your dream a reality.
One very important action a person can take is to have stable work history, which helps guarantee that he or she makes a sufficient monthly income to afford the home. This may seem obvious to some, but as part of a guide for how to get from point A (renting) to point B (home-ownership), it must be stated. Winning the lottery or becoming a famous actor offer lower probabilities of guaranteeing sufficient monthly income. Assuming you have sufficient monthly income from a stable source, you should…
1. Reduce your existing debt and avoid taking on new debt
What comes next gets a little technical, but bear with me here… I am concerned with and referring to your debt-to-income ratio or DTI. To figure out your DTI, add your projected monthly home payment plus your other recurring debt payments such as car or credit card payments, then divide this number by your monthly pre-tax income. The industry standard for the acceptable threshold is 38% or less. This is a figure the industry uses to determine your ability to repay your loan, which will likely consist of hundreds of thousands of dollars. Another reason why you want to reduce your debt and avoid taking on new debt is related to your credit. Taking on new debt may temporarily lower your credit score.
2. Pull copies of your credit reports
Your credit reports and scores will convey your credit worthiness to a potential lender. A small or moderate difference in points can affect the interest rate of the loan which can equal thousands of dollars over the lifetime of the loan. Not only that, but a small or moderate difference in credit score can affect the amount of down payment required, potentially squeezing some buyers out. Therefore, you should check your credit reports for errors and attempt to resolve any found.
3. Prepare your documentation
As part of the loan process, you will be asked to provide some or all of the following:
– W-2s or 1099 income statements for the past two years
– Federal tax returns for the past two years
– Bank statements for the last several months
– Recent paycheck stubs
– Divorce decree
– Bankruptcy paperwork
– Proof of investment income
You might as well organize it and have it ready and you will be one step closer to owning your home.
4. Get pre-approved
Being pre-approved, particularly in a competitive market, increases your chances of landing your dream home. For one thing, the seller doesn’t have to worry about you being turned down for a loan. Being pre-approved also allows you to know how much house you can buy so you can plan accordingly.
If you follow the previous steps, you’re ready to take the final step of the loan process, which is contacting us!
Have any questions? Are you ready to get pre-approved? Contact one of our Loan Officers today!
*The views, articles, postings and other information listed on this website are personal and do not necessarily represent the opinion or the position of Big Valley Mortgage.
*The views, articles, postings, and information listed at this website are personal and do not necessarily represent the opinion or the position of Big Valley Mortgage.*
