What to Do Before Getting a Home Mortgage

Brad Smith
Written By Brad Smith

First-time homeowners must prepare themselves well before getting a mortgage. Mortgages vary by lender and borrower. A borrower with a solid down payment, strong credit score, and reliable income will fare better than someone struggling financially and lacking the same stability in their numbers. 

Getting your finances in order is imperative to securing the best mortgage terms for a homeowner. Here is what to do before getting a mortgage.

what to do before getting a home mortgage

Build Your Credit

Make debt payments, pay your bills on time, and pay off your credit cards. Make sure your credit score is excellent. This lets lenders know you are reliable. Check your credit report to ensure there’s nothing amiss or unresolved in your name.

Connect with a Mortgage Agent

A mortgage agent can help you find the right mortgage product for you. They will examine your finances, assess your advantages and disadvantages, listen to your needs, and identify suitable mortgage options based on your unique circumstances.

Eliminate Debts

Delinquent accounts and debts will not help you acquire a mortgage. They won’t help your monthly budget, either. As much as you can, settle your debts – from credit cards to vehicle loans, student loans, and anything else you may have followed you along.

Keep Old Accounts Open

The length of your credit history builds your credit profile. Keep your old accounts well-managed and open. You may be tempted to close them to simplify your finances. Yet, leaving them open will benefit you.

Limit Credit Applications

Avoid applying for new credit cards or products until after closing your mortgage. Each time you apply for another credit product, a hard inquiry is made on your credit report, lowering your score. Take all your help and ensure your credit file is kept clean and tidy.

Determine How Much the Down Payment Will Be

Figure out how much you want to save for a down payment. Though you may not need to pay 20% to buy a house, putting down less means mortgage insurance. This will increase your monthly payment.

Establish Reliable Employment Income

You must establish strong, reliable income and employment to get the best mortgage. Avoid quitting or being let go if you can. Do not start your own business or go freelance when applying for a mortgage. Work hard to demonstrate a steady stream of income that will last a long time.

Calculate and Budget for Closing Costs

Find out what closing costs you must pay when purchasing your future home. These will be thousands of dollars above your down payment. The money for these can’t come from what you get from a mortgage. Have those funds set aside and ready before you get a mortgage.

Compare Fixed-Rate and Variable-Rate Terms

Fixed-rate mortgages are static and hold the interest rate in place over the mortgage term. Variable-rate mortgages have adjustable interest rates that can go up or down. Consider whether you are better off with a fixed-rate or variable-rate mortgage.

Define Your Mortgage Term

Choose your mortgage term. Many homeowners opt for a term that extends up to 30 years, but there are 20-year terms, 15-year terms, 10-year terms, and 5-year terms. Each set term has a specific interest rate, another factor to consider when considering the length of term you want.

Be Honest About the Financial Commitment

A mortgage is a financial commitment you must stick with for the loan’s full term. It’s unavoidable. Take an honest look at your finances. If they’re not stable or you’re not ready, continue working on them before locking yourself into a monthly payment schedule.

Use a Mortgage Calculator

A mortgage calculator will tell you what you can afford based on your income, debt, and other factors. This will show you your monthly mortgage payments. A home affordability calculator can then highlight your budget for buying a home based on this variable.

Consider Different Lenders

Look at different lenders. Examine their terms and interest rates. If your usual bank is not providing a mortgage you like, switch to another. Compare mortgage products and research what might best suit you.

Apply for Mortgage Pre-approval

A mortgage pre-approval will identify any issues in your finances and confirm a definitive maximum amount for your future mortgage. After preapproval, you can start making real estate offers and know you have the finances to complete the purchase.

smith brad omni

Written by Brad Smith

CEO & Lead Interior Designer

Brad Smith is an experienced interior designer and the founder of OmniHomeIdeas.com. With a Master's degree in Interior Design from Pratt Institute and a passion for creating safe and healthy living spaces, Brad shares his expert insights and innovative design ideas with our readers. His work is driven by the belief that home is where every story begins.