If you’re ready to buy a home, you’re probably already considering what mortgage options are available to you and which mortgage lender is right for you. However, before you start down the path of finding the right Maryland mortgage lenders, there are important steps you should take to prepare your personal finances that will help make the process more efficient and secure the best mortgage rates.
Pay Off or Consildate Debt
A major factor that will affect the mortgage rates you have access to is your debt-to-income ratio. Essentially, how much each month do you have to pay in debt compared to what you earn. There are several types of debt that can affect your overall finances, whether it be a car loan, student loans, credit card debt, medical debt, unpaid taxes, and more. Before reaching out to Maryland mortgage lenders, try to pay off as much of this debt as you can. If you’re having trouble managing debt, debt consolidation may be an option worth exploring to help make payments more streamlined.
Know Your Credit Score and How To Improve It
Your credit score is another key factor that helps loan officers determine what loan amounts and rates you qualify for. Every 12 months, you are entitled to a free credit report from the three major reporting agencies: TransUnion, Equifax, and Experian. These reports will help you get a sense of your overall credit health and identify places where you can begin to improve your score. Our last step, debt elimination, is one such priority that will help improve your score and make it more appealing to lenders. However, there are other steps you can take to help improve your credit as well. One thing to note is that “hard inquiries,” like applying for a mortgage, are rumored to adversely affect your credit score. While this is true, an occasional hard inquiry, such as for your mortgage, shouldn’t have this effect. Rather, you should avoid lots of loan applications over a short period of time.
Save Up for a Down Payment
One of the biggest costs when purchasing a home is the down payment. Unless you have access to a specialized loan, such as an FHA Loan, VA Loan, or USDA Loan, it is likely that you will have to put down 20% of the purchase price on your home. That’s no small feat. It’s crucial to save over time to lessen the burden of your down payment on your finances. The more you save for a down payment, the better chance you have at affording the home you want. Don’t forget to speak with your Maryland mortgage lenders about grants that may be available in your area. For instance, in some municipalities, first-time buyers can get grants to help them afford down payments. If you’d like to learn more about the specialized loans mentioned above, check out our previous blog.
Pre-approval is a process that will help you make more informed decisions when shopping for loans and finding a home that’s right for you before signing. This process will help you estimate what you can afford based on information like your household income, credit score, outstanding debt, and more. Pre-approval is a great method to give you the knowledge you need when shopping for your home.
Get the Maryland Mortgage Loan That’s Right for You With Federal Hill Mortgage
If you want to check out the #1 ranked mortgage company in Maryland, you’ve come to the right place. Federal Hill Mortgage has years of experience offering great rates to our clients to help them finance the homes of their dreams. Get started on your application today.