Getting your finances in order
Develop a budget. It’s a good idea to use actual receipts to develop a budget for what you actually have spent. That way you get accurate numbers instead of what amounts to a guess. Using longer periods of time, such as 3, 6, or 12 months will allow for seasonal and unexpected budget items that also need to be accounted for.
Reduce your debt obligations. In most cases, mortgage programs look for a total debt load of no more than 36% or 45% of your gross income. Since this figure includes your mortgage, which typically can range between 25 percent and 30 percent of your gross income, you need to get the rest of installment loans, student loans, revolving balances down to between 10% and 15% of your total, gross income.
Know where your money is going. Most people know how much they spend on rent and utilities, but it is the little expenses that tend to add up. If you don’t keep your past receipts, try writing down or tracking everything you spend for a single month. This process should present some great opportunities for you to save.
Save for your down payment. Although it’s possible to get a mortgage with zero, 3%, or 5% down, you can usually get a better rate and a lower overall loan cost or payment if you put more down.
Establish a good credit history. Get a credit card or an installment loan, and make payments by the due date, every time. Do the same for all your other bills. Pay off the entire balance promptly. Establishing a credit history is extremely important and can have significant implications on your loan terms and what you can afford.
Get approved! Making a mortgage application to find out what you qualify for, and what you will need to do to qualify is free! At SaviBank, we love working with our customers, helping them better understand what they need to do to qualify for that first, second, or even third home.Contact Us Apply Now
Can I apply for a loan before I find a property to purchase?
Yes. Applying for a mortgage loan before you buy is a good idea. If you are pre-qualified for a specific amount, you’ll know which homes are within your budget and be able to negotiate confidently with the seller. Once you have completed and submitted your application, a mortgage banker will contact you with further information.
What happens at the loan closing?
The closing will take place at the office of a title company or attorney in your area who will act as our agent. If you are purchasing a new home, the seller may also be at the closing to transfer ownership to you, but in some states, these two events happen separately.
During the closing, you will be reviewing and signing several loan papers. The closing agent or attorney conducting the closing should be able to answer any questions you have or feel free to contact your mortgage lender if you prefer.
Just to make sure there are no surprises at closing, your mortgage lender will contact you a few days before closing to review your final fees, loan amount, first payment date, etc.
I’m purchasing a home. Do I need a home inspection AND an appraisal?
Both a home inspection and an appraisal are designed to protect you against potential issues with your new home. Although they have different purposes, it makes the most sense to rely on each to help confirm that you’ve found the perfect home.
The appraiser will make note of obvious construction problems such as termite damage, dry rot, or leaking roofs or basements. Other obvious interior or exterior damage that could affect the stability of the property will also be reported.
However, appraisers are not construction experts and won’t find or report items that are not obvious. They won’t turn on every light switch, run every faucet, or inspect the attic or mechanicals. That’s where the home inspector comes in. They generally perform a detailed inspection and can educate you about possible concerns or defects with the home.
Accompany the inspector as instructed during the home inspection. This is your opportunity to gain knowledge of major systems, appliances, and fixtures, learn maintenance schedules and tips, and ask questions about the condition of the home.
What are closing fees, and how are they determined?
A home loan often involves many fees, such as the appraisal fee, title charges, closing fees, and state or local taxes. These fees vary from state to state and also from lender to lender. Your SaviBank mortgage banker should be able to give you an estimate beforehand.
To assist you in evaluating our fees, we’ve grouped them as follows:
- Third-Party Fees
Fees that we consider third-party fees include the appraisal fee, the credit report fee, the settlement or closing fee, the survey fee, tax service fees, title insurance fees, flood certification fees, and courier/mailing fees.
- Lender Fees
Fees such as points, administration fees, document preparation fees, and loan processing fees are retained by the lender and are used to provide you with the lowest rates possible. This is the category of fees that you should compare very closely from lender to lender before making a decision.
- Required Advances
You may be asked to prepay some items at closing that will actually be due in the future. These fees are sometimes referred to as prepaid items.
If an escrow or impound account will be established, you will make an initial deposit into the escrow account at closing so that sufficient funds are available to pay the bills when they become due.
If your loan requires mortgage insurance, mortgage insurance payments may be collected at closing. Whether you must purchase mortgage insurance depends on the percentage of the down payment you make.
If your loan is to finance a purchase, you’ll also need to pay for your first year’s homeowner’s insurance premium, and if required, flood insurance, prior to closing.