Tennessee Mortgage Lender - 3 Things You Need to Know Before Applying

3 Things You Need to Know Before Applying

Buying a home is a big financial commitment and one that you really need to think about before you apply for a mortgage. Our Tennessee mortgage lender team knows that being prepared is important in the mortgage process and there are some things that you should know before you take that step.

Know What Documents You Need

The mortgage process requires quite a bit of paperwork. You will need to prove your income, employment, and overall financial health. Knowing what documentation you need and making sure you have gathered it together before you apply for a mortgage will help the process run smoother.

Most mortgage lenders have a standard list of documents they will need, such as three month’s worth of pay stubs, income tax reports, and bank statements. If you are self-employed, you will need to present extra documentation. You will also need documentation that explains large transactions in your bank account, such as funds for a down payment that has been gifted to you. If you aren’t sure about what you will need, the best thing to do is call your lender and ask.

Know What You Can Afford 

Knowing how much you have to work with is also important when buying a home and applying for a mortgage. Lenders will advise you to make sure your monthly mortgage payments are not more than 28% of your monthly gross income. You also need to consider any other debts you are paying, such as personal loans, credit cards, and car loans. Your debt payments should be no more than 36% of your gross monthly income. Some lenders can be flexible with this, whereas others can be stricter, depending on your credit score.

Know the Market

The housing market can affect the type of loan you are able to get. Certain types of properties may be less desirable than others and end up costing you more. For example, in an area where there have been a lot of condo projects that have gone into bankruptcy, lenders will look at the property’s finances, as well as yours. This could lead to them requiring a larger down payment than normal. Always check with a real estate agent to get a better understanding of what is happening in the market. They can help you stay away from any risky properties and save you a lot of money.

Knowing these three things are very helpful, but there are still other things to consider when buying a home. Your credit score is one of these items and it’s important that you get familiar with it several months in advance of applying for a mortgage. This will give you time to clean up your credit report and raise your credit score.

You’ll want to look for any errors to start with and dispute these. Also, look at where your weak points are in your report. For example, you may have a few high-interest rate credit cards that are having an impact on your credit score. Paying these down can help you raise your credit score.

The more you know before you start the mortgage process, the better off you will be. If you have questions about applying for a mortgage, give our Tennessee mortgage lender team a call today at (615) 833-0456!