4 Things To Do Before Applying For A Mortgage

Are you eager to become a homeowner so that you can save money? Having a home is a great way to build your wealth as the home appreciates in value. But don't let your eagerness cost you time and money. 

Here are four things you need to do before you sign apply for a loan: 

Know How Much Of A Mortgage You Can Afford 

Financial guru Dave Ramsey is famous for telling his radio listeners to not take out a loan that's more than a quarter of their take-home pay. This includes everything related to your house — such as home insurance, taxes, and any big repairs that you need to make and finance with a loan. A single person making $4,000 a month should be looking at a home that will have a mortgage of around $1,000. But a working couple who brings home $8,000 a month can afford twice that. 

Raise Your Credit Score 

The higher your credit score, the lower your interest rate will be. Raising your score will take time, so the sooner you start this, the better. Make it a priority to pay your minimum payments on time every month. Don't apply for any new credit cards. If you have more than 3 open credit cards, close out the newer ones. Start to eliminate consumer debt. Having a good credit score may also help you score better rates on auto and home insurance. 

Shop Around For The Best Mortgage Rates 

Many people think that all banks are the same. Each one will have slightly different rates and fee structures. It's in your best interest to find at least three banks or credit unions to compare. Go in to their offices and sit down with a lender to learn about their underwriting process. Compere the fees and interest rates to see which ones offer you the best deal. 

Get All The Necessary Paperwork Together 

Before you get too engrossed in house hunting, start implementing these tips. They can save you time and money.