One of the most important steps when buying a home is getting a mortgage. Real estate in Montrose, Colorado is in high demand. What do you need to do to get a mortgage in 2020? You want to make sure your finances are in order to get approved for a mortgage. There are steps that you should be taking before you even walk into a bank or lender’s office. You’ll want to do things such as watching your credit, making on-time payments, and paying off debts.
Watch Your Credit
To improve your credit score, try to keep the overall balances on your credit cards low. Maxing out any credit cards is a bad idea for your credit score. The higher the balances are on your cards, the lower your score will be. Your credit score has a huge impact on getting a mortgage for buying a home in Montrose, Colorado.
If you’re going to be getting a mortgage soon, it is best to avoid opening up any new accounts. Opening a new account usually will result in a hard inquiry on your credit. If your credit is rated as excellent, it may not be as much of an issue if your credit drops a little. But if you have a lower credit score, a hard inquiry can make your credit score drop lower than what is needed for a mortgage.
One key factor in obtaining a mortgage is your debt to income ratio. Pay off as much debt as you can. If your debts are lower, your lender is more likely to allow you to borrow a higher amount. One very important debt to pay off is collections. Collections can really tank your credit score and seriously affect your ability to get a mortgage.
Make on-time payments for your credit cards, bills, and loans
Most people know that making on-time payments with your credit card bill is important. What a lot don’t know is that if you’re late in making payments on bills or other loans, it can negatively affect your ability to get a mortgage. Make sure you keep on top of your bills and make payments on time. It’s important to make payments on your rent, utilities, student loans, car loans, and credit cards on time for better approval odds for better mortgages.
One of the best tips for first time home buyers is to start saving for a down payment and other expenses as soon as possible. The down payment and monthly mortgage payment is easy to calculate. But there are many other expenses and closing costs that you need to take into consideration to save up for.
Closing costs can add up to be 3% of the value of your loan. That means if you’re buying a $200,000 house, your closing costs could add up to be $6,000. Depending on the sale, negotiations can be made between the buyer and seller of who will handle closing costs. Closing costs will vary depending on the area where you are buying a home and what lender you use.
Other costs to save for
With most mortgage options, a lender will put a few months and up to a year of real estate taxes and homeowner’s insurance in escrow. The lender will collect the amounts due for real estate taxes to be put into escrow and then paid by the lender on the due dates. For homeowner’s insurance, a similar process is followed. A prepayment of one year of homeowner’s insurance is usually required along with an extra 2 months of payments to be put in escrow. These prepaid expenses can total up to 2% of the loan amount. In contrast, these prepaid expenses will be avoided by making a higher down payment of at least 20%.
Utility adjustments and cash reserves can also add up in purchasing a home. Utility adjustments usually only add up to be a few hundred dollars for the transfer of accounts and other services. Cash reserves are required by lenders. They don’t want you to be totally broke after buying a home and want to ensure that you have enough money for at least the first few months’ payments. Cash reserves don’t have to be kept by the lender or put into escrow, the lender just needs to verify that you have them.
The real estate market in Montrose, Colorado moves quickly! The houses here are in high demand because of everything that Montrose has to offer. Are you ready to sell your home? Contact me for more information. I am sold on Montrose, Colorado! If you are lucky enough to already live here, I am committed to helping you as well.