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How to Successfully Apply for a Mortgage

Whether you’re ready to buy your first home or forever home, there are a lot of steps involved beyond the fun, house hunting experience. Applying for a mortgage is a major part of the process, and it can be a somewhat stressful and time-consuming experience.

You'll have to gather and submit all kinds of financial records and paperwork, fill out forms and meet specific deadlines. And even if you're approved for a certain amount, you'll need to take a realistic look at what makes the best sense for your finances—then maybe look at your new home wish list and prioritize your true needs versus wants. 

Here we break down how to apply for a mortgage, avoid common pitfalls, and take the steps needed to ensure a more seamless approval and closing process. Of course, you can always turn to one of our highly knowledgeable and experienced PorchLight agents to help you navigate everything from start to finish. Along with helping you find the right home and right neighborhood, they can connect you with reputable lenders, negotiate the best possible deal and advocate for your best interests along the way. 

1. Check and Repair Your Own Credit

When it comes to how to apply for a mortgage, this is your first step. The better your credit score, the better your mortgage options will be. Pull your free annual report from Equifax, Experian and TransUnion. You can also use a free app like Credit Karma. Follow-up on and fix anything suspicious or inconsistent. See what debts you can pay off quickly, then make a plan to keep revolving credit balances low and reduce overall debt. It may also be smart to tuck away those credit cards and create a workable budget. 

2. Lower Your Debt-to-Income Ratio

Lenders will pay close attention to your debt-to-income ratio (DTI) —monthly debt obligations divided by gross income. This includes credit card, student/personal loan or child support payments, but not things like entertainment or groceries. Typically, lenders want a mortgage and home costs to be no more than 28% of your gross income. Once everything is calculated, your DTI should be no more than 36%. With fewer debt payments, you’ll have greater buying power. 

3. Get Pre-Approved by Your Lender

Pre-qualification only requires you to provide information about your finances and credit score. In return, you’ll get a general estimate of how much you can likely borrow. Pre-approval is more in-depth. A lender will look further at your finances and require documentation regarding your credit, income and debts. For your efforts, you’ll know exactly how much you're approved for, and even get it in writing. You can then search for homes in the appropriate price range, then put in an offer when you're ready.

4. Look Beyond the Home’s Price Tag

Keep in mind that the price of a home doesn’t exactly reflect its true cost. If you’re putting less than 20% down, you may be required to pay for Private Mortgage Insurance (PMI). Property taxes and homeowners insurance may also be rolled into your monthly mortgage payment—these expenses will go into an escrow account and be paid automatically for you by the loan servicer. And don’t forget HOA dues or condo fees, plus closing costs that buyers are responsible for such as earnest money, an appraisal and the home inspection. This is a significant purchase.

5. House Hunt with a Real Estate Agent

While your house hunt might begin online, a real estate agent is an invaluable resource when it comes to choosing the right home and neighborhood for your needs and lifestyle. They can also introduce you to areas where your pre-approved dollars will go further and neighborhoods that have huge appreciation potential. An agent will often know if a community or condo is due for a review of its reserve fund which can lead to higher HOA fees and stress on your budget.

6. Gather Your Financial Documentation

Closing on a home loan can be overwhelming. From providing two years of W-2s or 1099s to putting personal information on the table—like proof of child support payments—no rock is left unturned by your lender’s underwriter. So, gather all documentation as early as possible. Have records of your bank accounts, income tax returns, car loans, credit cards, any other debts, plus assets such as investments, other properties and your 401k. 

7. Don’t Make Changes to Your Job or Finances

Even after you’ve progressed from approved to “clear to close,” a lender will continue to track your finances and credit score until the day of closing. Keep paying your current mortgage or rent, as well as your bills and credit cards. Don’t close accounts, change jobs or switch to a new bank. And while it may be tempting, hold off on making major purchases for your new home, such as furniture or appliances. The goal is to maintain the status quo until all paperwork is signed.

Are You Ready to Apply for a Mortgage?

While buying a car may require a credit check and income verification, applying for a mortgage is a much more in-depth process. Once you decide to move forward with buying a home, be sure to talk to your real estate agent about the process. They can explain things further and put you in touch with the best lender for your specific circumstances—such as needing an FHA loan, even first-time buyer assistance for your down payment. PorchLight agents do so much more than show you houses, so feel free to lean on them to guide you.

To download a printable version of these steps, click here for a PDF.

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