Planning for home ownership is just as important as homeownership itself. Being prepared from the beginning can put you in a better place overall not only now but in the future. Nobody wants to purchase a home only to be foreclosed on or have too short sell it in five years. The purpose of buying a home or condo is to gain equity, responsibility, and a long-lasting investment. If you’re like most of us, you have to have a mortgage or a home loan in order to purchase a property.
Here are some great ways to plan and prepare for your home or condo loan application.
Understand your finances and credit history.
Before you even sit down with the lender and discuss how much of a condo you can afford, make sure you understand your finances yourself. Get a copy of your credit history from one of the three major resources, Equifax, Experian, or the Trans Union. They should be able to provide you a free copy of your credit history at least once per year. If you’re really ambitious, get a copy from each of the three sources in order to compare and make sure that they are similar. Go over the credit history and make sure there are no errors or mistakes. If so, do your best to correct those errors and if they cannot be rectified, write a letter of explanation for your lender with as much documentation and proof as possible. Understand your finances and how much income and debt you have. If you have no idea how much is coming in or going out each month, you may not be prepared for a mortgage payment.
You certainly don’t want to be sitting down with a lender only to get some surprises from your credit report you never knew about. Many errors can be corrected quite easily and if not, write a follow-up letter explaining any mistakes or problems you may have had. A lender will pull your credit whether you are buying a house or a condo or townhouse.
Collect the necessary documents you’ll need in order to apply for a condo loan.
This will include:
- Pay stubs
- Income Tax Returns
- Credit or Loan Papers
- Bank Statements
- Proof of any other income
These are the most common documents that your lender will need, however, depending on your current financial situation your lender may request additional documents in which they will give you ample time to collect those documents.
Lenders may request specific items from you depending on the type of condo you are purchasing and what the condo association requires. You may need to have additional proof of identification, utility bills or proof of rental history if you have not owned property before. You may need credit card statements or any one of a variety of documents and paperwork proving you are who you are and that you are qualified to repay the loan. Also, if you have a very common name like John Smith, you may need to provide additional identifications just to make sure you are the right John Smith that will be purchasing this property.
Once you have all the documents needed you’ll need to present everything to a lender.
Don’t forget to shop around.
Just because your bank seems to offer a great rate, a mortgage officer or loan officer made be able to have access to more options and programs that will better meet your financial situation.
So many people don’t shop around for a loan and the right terms. But, why not? You shop around for everything else when it comes to purchasing property, why wouldn’t you do that on the loan? You won’t be dinged by having several lenders look over your credit history in order to give you the best price, so take advantage of this type of shopping. Let lenders and loan officers know that you are shopping around so that they can give you the best terms and price. If they know that you haven’t looked around at all, you might be surprised at how many additional fees and costs could be attached to your home loan. If you need help at any time, feel free to give us a call. Because we have sold numerous condos in the Panama City Beach area, we have connections with very reputable and affordable lenders in the area.
Related Post: Creative Ways to Finance a Second Home
Don’t purchase anything large during this time.
Once you’ve begun looking at condominiums and home loans you don’t want to make any large financial decisions such as buying a car, taking out another loan, taking out a home equity loan or changing jobs. Anything that could change your financial status can affect not only your interest rate but your chances of getting the home loan at all. It simply better to put every type of spending on hold until your condo purchase closes.
Read more: 3 Ways to Manage Debt and Afford a Condo
It’s okay to ask a lot of questions. This is a lot of money we are talking about; purchasing a condominium could be hundreds of thousands of dollars so don’t feel embarrassed or apprehensive to ask your real estate agent, lender or title, and escrow officers any questions you might have. If you are wondering why they need certain documents or specific paperwork, simply ask. All of these parties involved are more than willing to help you understand every detail to the purchase and sale process so you feel confident and comfortable with your purchase.
If and when you’re ready, give me a call. I’d be happy to put you in touch with some loan officers in our area or provide resources to get you started.