Since the vast majority of home buyers, take advantage of, at least, some degree of financing, and securing a mortgage, would not it make sense, if these individuals, were better, ready, and prepared, to prepare effectively? As a Real Estate Licensed Salesperson, in the State of New York, for over a decade, I have witnessed individuals, lose – out, on obtaining, the home, of their needs, and dreams, because they did not prepare properly, and put their financial, eggs, in order! With that in mind, this article will attempt to briefly consider, discuss, and examine, using the mnemonic approach, what I refer to as, the CADRED of obtaining a mortgage.
1. Credit report / score: Before beginning the home – hunting process, wise potential buyers, obtain copies of their credit report, and fully review them, in order to identify any weaknesses, and / or inaccuracies! Before shopping, be certain your credit score, is, at least, in the 700's, or higher, so as to qualify, for the best available mortgages, and receive the most favorable rates. One can either do so, himself, or get a recommendation, of a quality mortgage professional, and ask them, for assistance, up – front! Do not wait for the last – minute, because, improving these scores, might take several months!
2. Assessment / evaluation: Have your mortgage professional, begin, by obtaining a pre-approval, so you know, what you qualify for, and look at houses, priced, accordingly, and affordably. In addition, hire a quality real estate agent, who will represent you, as a Buyers Representative / Agent, and provide you, with accurate competitive information / data, so you are certain, you do not over – pay, and have difficulty getting the desired house, to, Comp – out .
3. Down – payment: In most cases, you will need, approximately 20% of the purchase price, to put down, and get a mortgage, for the balance, although there are certain mortgages available, where less is required to be put down !
4. Reserves: In addition to the down – payment, accumulate necessary reserves, for contingencies, etc. Many lending institutions demand borrowers, demonstrate, they have, at least 6 to 9 months, worth of payments, in reserve. In addition, it is wise, to begin owning a house, with at least 2 other reserves, put aside, for maintenance / repairs, and renovations.
5. Earnings: You should understand, most lending institutions, want borrowers, to have earnings, which warrant the loan. There is a formula used, and discuss this, with your mortgage professional, so you know, what you might qualify for.
6. Debts: It is wise to pay – down, other debts, and avoid taking on, any additional credit (such as credit cards, loans, etc), because there is a loan, to debt, ratio, which is used. This should be done, in advance, and, by listening to the advice, of a trusted professional.
Pay attention to the CADRED of obtaining a mortgage, before hunting, for your desired home. Since, for most, their house presents, their single, largest financial asset, that does not make sense?