The new mortgage rules that are meant to protect consumers against bad lending practices could have an additional impact, requiring home buyers to put their finances in order.
Lenders will need to verify the income, assets, and debt of borrowers before they are approved for home loans. This is in line with new Consumer Financial Protection Bureau rules. Borrowers who can’t afford to make the monthly loan payments will not be approved for the loan.
Home buyers should have sorted their finances before applying for loans, even before the recession six-years ago. It is becoming increasingly important.
First, you need to take a step back. Then, take a pragmatic and realistic view of your financial situation.
Talk to your financial and tax advisors. Also, talk to your agent, as well as other people who have purchased a home in the past. And, if necessary, debt counselors.
These are the four steps to prepare your finances before you apply for a loan.
Check your credit score
Our Beverly Hills Mortgage Brokers strongly suggest that you do this six to one year before purchasing. Credit scores of 740 and above should lead to a lower loan interest rate, as well as less money down, sometimes as low as 3%.
The terms are more favorable if your credit score is higher.
You can check your credit score and correct any errors by getting a free credit report before you buy a house. Don’t take that time to repay your debts.
Credit is best treated by time passing
Document income
Beverly Hills Mortgage Brokers will now need to verify income of borrowers. You’ll need all income reported on tax returns in order to submit a loan application.
This is an example of when you shouldn’t take every tax deduction to prove that you have zero income.
Your employer will contact you to verify that you have a stable job. You may need to stay longer if you have a job that is commission-based and your income fluctuates.
A borrower will be able to show good credit and steady income by following the two-year credit rule.
They will have to answer questions about their past two years and how they earned their income.
Cash is important
The bank won’t ask for all your income to go towards a mortgage. It will allow you to pay up to a third of the monthly mortgage payment, insurance, taxes and taxes. But they want to see some money left over.
These assets could include a savings account or retirement fund. You can use the money to make a downpayment or for an emergency fund in case you lose your job, or if there are repairs needed on your house.
You will need bank statements for 60 days. The bank will not need to see the account statements for 60 days if the money isn’t in the account for more than 60.
To qualify for a loan, you will need to make a deposit of between 3.5% and 20%. However, you still need to have some cash.
A Beverly Hills Mortgage Broker wants to find reserves to pay for the costs of owning a house, such as a mower and appliances. However, you shouldn’t use those cash reserves to purchase new items.
Find out what your eligibility requirements are
Research and understand the mortgage options three months before you buy a house. You will need to determine how long you intend to live in your home before you can decide if you should apply for a fixed-rate or adjustable loan.
To find out how much loan you are eligible for, speak to financial advisors. You may be eligible for more loan than you anticipated. This doesn’t mean that you should purchase a bigger, more expensive house with higher monthly mortgage payments.
Although buying a house can be difficult, a well-prepared homebuyer can make it easier and act faster when the right home comes up for sale.
The homeowner of today is far more prepared.
It can be difficult to get your finances in order. But it doesn’t have to be daunting if you do it months before you apply for a loan.