Home Loans and Mortgages in St. Louis
By Tim Whitmire
Transitioning from "We would love to own our own place" or "We need more space" to purchase a home can seem daunting. We at First Integrity Mortgage Services understand how important taking this step is. We take great pride guiding home buyers through this process every day. The key to an enjoyable home buying experience is planning and preparation.
The ideal time to consult with a mortgage professional to start the planning and preparation process is six to twelve months prior to making your home purchase. This allows for ample time to maximize your credit score, while also learning about common mistakes you can easily avoid with a little planning. Three key components to a pre-approval are Credit, Employment/Income and Assets/Down Payment.
Credit
Building a great credit score not only helps get loan approval, it is also critical to obtaining the best possible interest rate. Paying bills on time makes up a large portion of a person's credit score. It is definitely important to continue to make timely payments on all accounts during the time leading up to making a home purchase
However, almost as important as making timely payments is keeping balances on revolving credit, such as credit cards, low compared to the high credit limits on each account. Credit scores also take into account factors such as the number of recent credit inquiries a person has and the length of credit history, among other things.
Many home buyers want to get their financial house in order prior to purchasing a home and do this by consolidating debt. Although this may make financial sense, it can have a devastating impact on a person's credit score. Consolidating debt, many times includes opening a new account, closing existing accounts, and results in having one maxed out credit card. This is a common mistake that can significantly decrease a home buyer's score right before they need a high score the most. This is the kind of mistake the professionals at First Integrity Mortgage can help you avoid by planning and preparing for your purchase six to twelve months prior to purchasing a home.
Employment/Income
Ideally, it is important to not make any major employment changes leading up to purchasing a home without consulting your Licensed Mortgage Banker first. This includes changing employers and/or the structure for which you are paid. It is very important to know that variable types of income and/or employment such self-employed income, commissioned based, bonus based, overtime, and part time employment income all must have a two year history and be averaged over a two year period to be used as qualifying income for loan approval. A self-employed borrower literally has $0 qualifying income until they have been self-employed at least two years. Even though a change may lead to greater income earning potential, it is important to not make major employment changes prior to purchasing a home.
Assets/Down Payment
The best way a home buyer can help themselves is to Save, Save, Save. Having funds available for down payment and reserves makes loan approval much easier and provides home buyers the ultimate flexibility when considering loan options. Having funds available is a wonderful thing, but tracking the movement of funds can be tricky. All major deposits are scrutinized and must be documented. Obtaining loan approval is quicker and easier when less funds are being moved prior to closing. It is incredibly important to keep all documentation. Preparing ahead of time can avoid headaches during the processing and underwriting of the mortgage.
Having funds available is ideal, but isn’t always a reality. Gifts and grants may become a necessary part of the process. Many times grants require home buyer education and have income restrictions. It is extremely important to get a head start and plan ahead for such programs.
Planning and preparation
The information above is only a small sample of information considered when a mortgage professional at First Integrity Mortgage helps home buyers prepare to purchase a home and why it is so important to plan and prepare six to twelve months prior to purchasing a home. We help home buyers every day and we can help you and/or your loved ones too!
For any questions or comments, Tim can be reached at 314-402-8184 or timw@firstintegrity.com.