Print

INFORMED HOMEBUYERS ARE MORE EFFECTIVE CONSUMERS
ABA Provides Tips on Finding a Mortgage

Today, there are a growing number of obstacles for homebuyers, including a higher credit score standard and more restrictions on credit. Consumers should have a thorough understanding of the changing market when shopping for a mortgage. To find the right product, the American Bankers Association recommends that buyers:

• Be aware of first-time homebuyer programs. Call your banker or housing agency in your state, county and city to see what they offer. Sometimes these programs offer better interest rates and terms than for previous owners.
  
  
• Get pre-approved. Know the difference between "pre-qualified" and "pre-approved." Getting pre-qualified is a casual process where the lender tells you how much you should be able to borrow based on how much money you make, how much debt you have and how much you have to put down on a house. Pre-approval occurs only after you actually apply for the loan and the lender gives you in writing the amount you can borrow. A buyer who is pre-approved is more attractive to sellers and their agents than one who is only pre-qualified. Once you find a mortgage that is best for you, get pre-approved before you start making offers on a home.
  
  
• Be honest with the lender and yourself. You don't want to borrow more than you can afford. Your bank can provide a calculator to determine if you can afford to borrow and if so, how much. The ABA's calculator is available at: aba.com/aba/static/calculators.htm
  
  
• Look at the basics of the loan. Don't get distracted by all the bells and whistles. Choose the type of loan that makes the most sense for you. Use financial calculators like those provided by ABA to determine if you should go with a fixed rate mortgage or an adjustable rate mortgage. 
  
  
• Know your credit situation. Obtain a copy of your credit report and FICO score or VantageScore at least six months before you apply for a mortgage. This should give you enough time to challenge and remove any errors on your credit report and take care of anything that's hurting your credit score.
  
  
• Consider all the costs. A lender will review costs like fees, closing costs, points, homeowner insurance, and taxes. But consumers should also consider repairs and maintenance costs. As a homeowner, you are responsible for those additional costs – there won't be a landlord to call.
  
  
• Organize your finances before you go to the bank. While each bank may require different documentation, at a minimum you will need:
  • Pay stubs.
  • Tax returns.
  • Financial statements (one that is less than 60 days old).
  • Copies of additional monthly payments such as car loans, credit cards, student loans, etc.
  • Any additional information (such as proof of additional income) that you think will help your banker to positively evaluate your credit request.