Understand your Mortgage
The biggest purchase most of us will ever make is our home. While you are spending money to make the initial purchase, within a matter of months you can begin to leverage your home and manage its value with improvements, equity and so on. A common question among many people is: How do I refinance my mortgage?
For many, a second mortgage on the home is a way to send children to college while others use the equity that builds with the years to make those additions or remodeling they have always wanted. Many homeowners, however, are overwhelmed by the financial intricacies of buying, owning and managing the value of their home and do not use it to the fullest extent that they can.
Really, the processes involved are quite basic, and you can make things even easier on yourself by steering clear of some common pitfalls along the way. In the mortgage process, there are a few common mistakes or miscues that future homeowners make that can really throw a wrench into your plans. While the entire process may leave you slightly bewildered, you can at least make it easier by following a few of our basic guidelines.
While most of us will have some degree of debt when we apply for our mortgage, it should be manageable and within your means. If it isn’t, you will not be approved for the mortgage. This is no mystery. However, when you are beginning, in the middle of, or ending the mortgage process, you should take any measure necessary to ensure your financial situation remains stable or constant at the least. Being pre-approved for a loan is great, but if you go out and tack on some new debt like a new car or even a stereo that will require some sort of monthly payment, you are asking for some serious trouble. You see, your loan pre-approval was based on a particular level of income and then compared to your expenditures. Make a change in that equation and you are taking an unnecessary risk.
Chances are, you will not get a mortgage approved if you are not working or if you do not have a steady income. Having said that, you may also endanger your chances of getting a mortgage by making any change in your employment status, even a new job that pays you more money. The lender is looking for a solid employment history along with annual income to help make a decision about your loan. Change any of these factors and you will likely have to go through the approval process again. If you anticipate a job change at any time during your mortgage process, it is a good idea to be up front about the potential of the move and when you anticipate it may take place. You by no means have to stay in a job that you don’t like or pass on a good opportunity during the mortgage process, but you do need to ensure you are clean with your lenders.
While new homeowners are excited about the move into their new home, you have to understand that the closing process often takes several weeks to complete. Begin packing household items, clothes and the items in the attic, but be sure to leave your financial papers in a safe place. This can be especially important if you are moving out of state or to a different town where a box full of your important mortgage documents will be tough to retrieve should you have to produce them. Keep your files contained at a central location where you will have easy access to them right up to the time you move to the new house. This can save a last minute headache for you and your lending professionals.
Your finances are of primary importance when you go for a mortgage, so it pays to do some of your homework before you even find or begin looking for a house. In many cases you can build a better credit report or may even find after review some signs of bad credit that are out of place for some reason. Credit reports are not perfect and can cost you a mortgage approval if you don’t take steps to manage them. Work with a financial planner well in advance of your hunt for a new home to ensure you are the perfect candidate for a mortgage and you will have few obstacles to negotiate during the process.
Taking a little extra time to look at the big picture as it applies to your finances and credit rating will help you save valuable time in the mortgage process and will make working through the seemingly endless paperwork much easier.
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