How To Prepare For Mortgage For First Time Home Buyers

This BLOG On How To Prepare For Mortgage For First Time Home Buyers Was UPDATED And PUBLISHED On March 8th, 2020

The best way on How To Prepare For Mortgage is to first consult with a loan officer.

• Do not just talk to one loan officer but many loan officers and due to your own research
• As you talk to more loan officers, you will get different answers to your questions so that is where doing your own research comes in

In this article, we will discuss and cover How To Prepare For Mortgage For First Time Home Buyers.

FAQ On How To Prepare For Mortgage For First Time Home Buyers

I highly recommend that you get started on how to prepare for mortgage as soon as possible. Here are some reasons why:

• Higher credit scores mean lower rates
• There are basic tricks of the trade to boost credit scores
• Most loan officers will be able to help borrowers to maximize their credit scores
• However, everything in the mortgage process does take time and cannot be done overnight
• Consumer credit reports may contain errors
• It can take several months to correct the errors
• Consumers may not have credit disputes on credit report

However, credit disputes with zero balance and/or under $1,000 balance is exempt from retractions. Medical credit disputes are exempt as well.

Mortgage Guidelines On Credit Disputes

Borrowers cannot have credit disputes on non-medical collection accounts and charge off accounts.

• Borrowers may have maxed out credit card balances
• Maxed out credit cards can drastically lower consumer credit scores
• It takes time for the credit bureaus to reflect the credit card balances that have been paid down
• Consumers may have low credit scores, not because of bad credit but no credit
• It takes time for you to add yourself on as authorized user to a spouse’s credit card or family member’s credit card
• Or get several secured credit cards
• A new secured credit card can boost your credit scores by 40 or more FICO points
• Consumers with any revolving credit should start re-establishing credit with secured credit cards

It is a great tool to boost credit scores.

How Mortgage Underwriters View Overdrafts And Irregular Deposits In Bank Statements

Overdrafts in bank account:

• Lenders do not want to see any overdrafts in the past 60 days

Unsourced Deposits:

• Borrowers with cash on hand or irregular deposits that have not been seasoned for at  least 60 days, it is best to deposit the cash as soon as possible in the bank account and let that cash season
• This is the best way on how to prepare for a mortgage with cash

How To Prepare For Mortgage And Maximizing Credit Score

Maximizing credit scores is the best way on how to prepare for mortgage. Remember that lower credit scores mean higher mortgage interest rates. There are some quick ways of boosting credit scores. Lenders view borrowers with lower credit scores as higher risk borrowers.

Here are some tips on maximizing your credit score:

• Consult with a loan officer
• The loan officer will review tri-merger credit report with a borrower
• Many loan officers will run credit report through a FICO Analyzer
• The results will show how to maximize credit scores by doing certain things like payment down a certain amount of the various credit cards and/or other debts consumer may have
• Maxed out credit cards will drastically drop credit scores
• Paying them down to 10% balance will maximize credit scores
• Consumers with no revolving credit card accounts, getting three secured credit cards will boost credit scores

Adding yourself on to as an authorized user to a borrower with perfect credit card payment history and low credit card balance who has the same last name or lives in the same household will help boost credit scores.

Choosing The Right Mortgage Lender With Your Credit And Financial Profile

Finding the right lender is extremely important:

• This holds true especially borrowers with less than perfect credit or had prior financial issues
• Most lenders have overlays
• Lender overlays are mortgage requirements that are above and beyond the minimum federal mortgage guidelines
• Borrowers who have 800 Plus credit scores, 40% debt to income ratios, and perfect credit payment history may not have to worry about going to a lender who has overlays
• But those who had prior credit issues and higher DTI may need to worry about the lender they consult with

They need to find out whether that lender has mortgage overlays that may affect them.

What Are Typical Mortgage Lender Overlays Lenders Have

One key on how to prepare for mortgage is to make sure the types of credit issues you have and shop for a lender that does not have any lender overlays.

Again, overlays are additional guidelines lenders has which is above and beyond those of agency guidelines:

• Federal Housing Administration for FHA Loans
• The United States Department of Veteran Affairs for VA Loans
• United States Department of Agriculture Rural Development for USDA Loans
• Fannie Mac/Freddie Mac for Conventional Loans

Here are some typical lender overlays mortgage lenders have:

• Overlays On Credit Scores
• On Collection Accounts
• On Charge Off Accounts
• Credit Tradelines
• Gift Funds
• Reserves
• Verification Of Rent
• Debt To Income Ratios
• Recent Late Payments
• Late Payment After Bankruptcy
• Overlays On Late Payment After Foreclosure

The best start on how to prepare for mortgage is to start early. Even if you just got through a bankruptcy or foreclosure, starting on how to prepare for mortgage as soon as possible is beneficial. Two to three years flies after filing bankruptcy or just had a foreclosure/deed in lieu of foreclosure recorded. It is never too early to start preparing for mortgage. If you need any free advice on how to prepare for mortgage, please contact Gustan Cho Associates at 800-900-8569 or text for a faster response. Or email Gustan Cho at gcho@gustancho.com.