If you are dreaming of buying your own home, don't let the fear of being turned down by a mortgage lender keep you from trying. On the same note, you should not simply assume you can walk into a bank, tell them you have found a house you want to buy and expect them to hand you a check, either. Depending on the type of mortgage you seek, there is certain criteria you must meet in order to qualify, but it may be easier than you think.
Determine your credit score. According to the Fair Isaac Corporation (FICO), you should obtain your credit score prior to applying for a mortgage. The Federal Citizen Information Center reports that a FICO score above 700 is very good, while a score below 600 may mean higher interest rates or a declined application.
Clean up your credit, if necessary. Bankrate recommends reporting and correcting any errors on your credit report to boost your credit score rapidly. Paying bills on time and paying down debts as quickly as you can will help, as well.
Determine how much you can afford. Use an online mortgage calculator to determine monthly payments for homes that appeal to you. This will help you decide on a price range. Figure in property taxes, insurance and other monthly or annual fees, such as homeowners association dues, as well. The Federal Reserve Board reports that many lenders allow 28 percent of your gross income to go toward housing. They typically allow another 8 percent to go toward other debt.
Save up some cash. According to the U.S. Department of Housing and Urban Development, you will be required to pay an earnest money deposit displaying your sincere intentions to buy the home of your choice. You will likely need a down payment of between 3 and 20 percent of the selling price and must pay closing costs when you buy the home as well, unless the sellers agree to pay them for you.
Get in touch with a lender to apply for preapproval. Once you have your proverbial ducks in a row, call or surf around to find a mortgage lender. You will have to provide information such as tax returns for the last two years, bank statements and other proof of your income and assets. Getting preapproved is not a contract. It simply provides proof that you qualify for a mortgage and makes you more attractive to sellers.
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