3 Steps To Prepare For A Mortgage

Dated: January 13 2021

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You want to buy a house. That’s great! This monumental purchase is part of the American Dream. Making the decision to buy is far different from acting on it, however. And what comes next in the "action stage" is not nearly as glamorous as exploring new homes and imagining your new life.

Adding a mortgage to your list of expenses is no small task and needs to be taken seriously. Here are three things to prepare you for getting into action...

1. Check Your Credit

If there is a deal breaker when it comes to applying for a loan, then it’s your credit score. While there’s no good way to truly judge a human being, a credit score is the way a business tries to judge a specific human’s financial responsibility. That’s the closest way to describe a credit score: do you pay off your debts, or do you build on them? When you spend via a credit card, how quickly do you pay that credit back?

Make sure your credit score is on the up and up when you decide to apply for a loan. If you don’t like what you see, chances are, neither will a loan officer, and the loan they offer you won’t have an interest rate you’ll want to see, either. Taking steps to improve your credit score will make your life much easier, and if all else fails, Experian Boost can give you a, well, boost, pretty quickly.

2. Reduce and Refine

What matters to mortgage brokers is your debt-to-income ratio. They want to know if you can actually afford what you’re borrowing. In other words, are you bringing in more money than you spend.

You also want to stay away from making any big purchases when you’re in the process of buying a home. Now is not the time to buy that new car or furniture or open any new lines of credit. Try slowing down the smaller purchases, too. Eat out less, cut back on Amazon purchaces, that kind of stuff. You want your bank history to look pristine when there’s a loan officer judging you.

3. Set a Timeline

Consider the major decision in this process: How long are you going to give yourself to pay off this loan?

When you get a new mortgage, they give you two options (that aren’t easily, or feasibly, changed after you pick): 15 years or 30 years. 

If you choose the 15-year option, you will be paying a larger amount every month, but the long-term commitment is a bit more tolerable. It’s just a decade and a half to get through. If you tend to be impatient, maybe that’s the way to go if you can afford an entire house plus interest in that time. Otherwise, you are looking at loan payments for over a fifth of your life.

This decision will have a major impact on the quality of your financial lifestyle and health for the next few decades, so make it with care.

Completing these tasks won’t make the process of buying a house simple and stress free, but the will make the process of budgeting much easier in the long run. All that’s left after that is finding the perfect place.

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Valerie L. Cortez

Valerie Cortez is the owner and managing broker of JPAR Rocket City. JPAR Rocket City espouses the Values of Productivity and Service in our offerings and our culture. As a brokerage, we provide what....

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