Q: What do I need for a mortgage?
A: W2 Forms for the last two or three years for all names listed on the loan
-All credit card account numbers and outstanding balance amounts
-Copies of at least one pay stub for all names on the loan
-Copies of 2-4 months worth of bank savings and checking accounts
-Addresses you've lived at for the past 5-7 years
-List of any major assets
-Copies of 401(K) or other retirement statements
-Copies of personal tax forms for the last 2-3 years
-Lender, loan number and amount owed on all installment loans, such as student loans or car loans
Q: How is my credit score determined?
A: Credit scores range between 200 and 800. Scores above 620 are preferred in order to obtain a mortgage. The following factors help determined your credit score:
1.Your payment history-Did you pay your credit card on time? Were they late? How late? Bankruptcy filing and liens can have a negative impact.
2.How much you owe-You do not want to have too many accounts open with balances as this suggests you are already overextended. It is optimal to have a good proportion of balances to total credit limits.
3. The length of your credit history-The longer you have had accounts opened, the better. The average consumer's oldest obligation is 14 years old, indicating that he or she has been managing credit for sometime.
4. How much new credit you have-New credit is considered more risky. Avoid obtaining new credit before applying for a mortgage.
5. The types of credit you have-It is desirable to have more than one type of credit...a mixture of installment loans, credit cards and a mortgage.
Q: How can I improve my credit score?
A: Credit scores, along with your income and debt, are big factors in determining your loan terms and qualification. Improve your credit score by doing the following:
1. Review your credit report and correct any errors
2. Pay down your credit card bills. If it is possible, pay off all balances each month.
3. Don't charge your credit cards to the maximum limits.
4. Wait 12 months after credit difficulties to apply for a mortgage.
5. Don't order items for your new home on credit-such as appliances and furniture-until after your loan is approved. The amounts will add to your debit.
6. Do not open new credit card accounts before applying for a mortgage. Too much available credit can lower your credit score.
7. Shop for mortgage rates all at once. Too many applications can lower your score.
8. Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.
Q: How do I financially prepare to buy a home?
A: Here are 5 "to-dos" before purchasing a home...
1. Develop a household budget. Use receipts to help determined what you budget is based on realistic spending habits over the past few months. Remember to factor in unexpected costs like car repairs and doctor bills.
2. Reduce your debt. Your debt should not be more than 36% of your income.
3. Look for ways to save. The little things add up. Considering writing down everything you spend in a month and you may be surprised what your money goes to.
4. Save for a down payment. Designate a certain amount of money each month to put away into savings for a down payment. While you can get a mortgage with only 5% down, aim to put down 20% of the mortgage.
5. Establish a good credit history. Get a credit card and make payments by the due date. Do the same for all your other bills, too.
Q:What do I need to know about property taxes?
A: There are 5 things you should ask regarding property taxes...
1. What is the assessed value of the property? Note that assessed value is generally less than the market value.
2. When was the property last reassessed? Takes generally jump most significantly after a property is assessed.
3. Will the sale of the property trigger a tax increase? The assessed value of the property may increase base on the amount you pay for the property.
4. Is the amount of taxes paid comparable to other properties in the area?
5. Does the current tax bill reflect special exemptions that I may not qualify for? For example, is there a senior extemption?
Q:What are some common closing costs?
A: There are a variety of fees and expenses you and the seller will have to pay at the time of closing. Your lender will give you a good faith estimate of all settlement costs. These fees/costs include:
-Points or loan discount fees, which you pay to receive a lower interest rate
-Private mortgage insurance premium
-Insurance escrows for the homeowner's insurance, if being paid as part of the mortgage
-Property tax escrows, if being paid as part of the mortgage.
-Title insurance policy premiums
Q:What closing documents should I keep?
A: On closing day you will sign a lot of documents. Below are the papers that are necessary to keep.
1. HUD-1- This itemizes all the costs associated with the closing.
2. Truth in Lending Statement-Summarizes the terms of your mortgage loan.
3. Mortgage and Note- Spell our the legal terms of your mortgage obligation.
4. Deed-Transfers ownership to you.
5. Affidavits-Binding statements made by either party.
6.Riders-Amendments to the sales contract that affect your rights.
7.Insurance policies-Provide a record and proof of your coverage.
*Content provided courtesy of Realtor.org