If you’ve never bought a home or haven’t bought in a while, you’ll need to prepare yourselves and get pre-approved for a mortgage BEFORE you start looking for a home. Pre-qualification letters don’t carry much weight in the DC area. A pre-approval letter shows that you’re more likely to be able to get a loan, since a lender has done the initial steps necessary to verify that you can get a mortgage.
Preparation for a mortgage
Your credit needs to be in good shape to qualify for a mortgage. Several steps are necessary to get ready.
Take a look at your credit
Dispute credit problems
If you see anything on your credit report that is inaccurate, open a dispute and give as much detail as possible. This includes incorrect balances on open accounts, judgments that are satisfied.
Don’t close credit accounts
Good credit is important. Don’t close all your credit accounts, since it will affect your credit score.
Pay down debt
Part of being responsible with credit is not carrying high balances. If you have any that are more than 30% of your total credit line, pay as much as it as possible to get it below that threshold.
First-Time Homebuyers in DC, MD and VA
If it’s been over three years since you’ve had a mortgage, you can still qualify for one of these programs. There is a lot of help available:
Home Loans With Credit Challenges
If you have problems getting a conventional loan, alternatives exist. If you have a combined credit score of 580, your lender may look at FHA loans. Instead of being financed through a private bank, the money is provided by the Federal Housing Administration.
After the housing crisis, mortgages were very difficult to come by. But lenders are starting to offer more options that consider income from non-borrowers and payments that aren’t reported to the credit bureaus, like rent and utilities.
Can You Get Help with Down Payments?
With some of the highest-priced homes in the nation, saving 20% can be impossible. A variety of assistance programs are available through the local government. Some help with closing costs, too. Here are a few to get started:
Current DC, MD and VA Mortgage Rates
Take advantage of the current low mortgage rates while you can. Compare lenders, contact a few and be sure to take your time finding out what options are available.
Once you’ve gotten a commitment from a lender, it’s time to start house hunting. Hire a REALTOR to represent you. Buying a house is one of the most important financial decisions of your life; you want someone who understands the complexities of the transaction and has inside knowledge of the area you’re interested in living in.
Once you’ve found your house, don’t make any financial changes until AFTER you close. Your loan approval might be affected.
Take your time to get your credit in order before starting your house hunting. You’ll be glad you did.