Any advice on preparation for mortgage

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droid
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Any advice on preparation for mortgage

Postby droid » Mon Feb 06, 2017 10:05 pm

I'm about 18 months out from being in a position to apply for a mortgage and buy a house. What are things you would do or not do in this time period?


mountaindewvoltage
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Re: Any advise on preparation for mortgage

Postby mountaindewvoltage » Mon Feb 06, 2017 10:13 pm

droid wrote:I'm about 18 months out from being in a position to apply for a mortgage and buy a house. What are things you would do or not do in this time period?


Don't apply for any credit.... Not one single inquiry. Pay off your credit cards completely if you have any CC debt, significantly pay down any personal loans you may have, so for example, if you have a $10,000 personal loan opened 3 years ago, pay it down to 1.5k and roll that in with your mortgage. Make sure you have plenty of money down, and I mean plenty. If you're buying a $200,000 house, have at least $15,000 to put down on it if you're a first time buyer. If this isn't your first home, have at least $40,000 to put down.

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CarefulBuilder14
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Re: Any advise on preparation for mortgage

Postby CarefulBuilder14 » Mon Feb 06, 2017 10:49 pm

It would be helpful to know about your finances at present to make sure your plan is realistic.
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droid
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Re: Any advise on preparation for mortgage

Postby droid » Tue Feb 07, 2017 3:17 pm

CarefulBuilder14 wrote:It would be helpful to know about your finances at present to make sure your plan is realistic.


I'm a doctor second year out of training. Self employed (no W2). That's my main problem; not having an official employer, although my job is one of the most secure and stable that one can have in the US. If I had an employer I would have bought a house already. I have 3 car payments, 1 student loan, 10 credit cards and 700 credit score that has been as high as 750 and as low as 650 in the last year. I plan to just let it climb back up to the 750+ range. Wife already has 750+

droid
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Re: Any advise on preparation for mortgage

Postby droid » Tue Feb 07, 2017 3:25 pm

mountaindewvoltage wrote:
droid wrote:I'm about 18 months out from being in a position to apply for a mortgage and buy a house. What are things you would do or not do in this time period?


Don't apply for any credit.... Not one single inquiry. Pay off your credit cards completely if you have any CC debt, significantly pay down any personal loans you may have, so for example, if you have a $10,000 personal loan opened 3 years ago, pay it down to 1.5k and roll that in with your mortgage. Make sure you have plenty of money down, and I mean plenty. If you're buying a $200,000 house, have at least $15,000 to put down on it if you're a first time buyer. If this isn't your first home, have at least $40,000 to put down.


No personal loans.

I have one car payment that will be ending in less then 2 years but I think I can do the mortgage before then. I was wanting to just nip it in the bud, but I think I'll just keep it.

I have a furniture row card I'd like to close. I should probably hold on to that as well.

I should basically lock my credit, nothing new and close nothing, right?

TXviking
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Re: Any advice on preparation for mortgage

Postby TXviking » Thu Feb 09, 2017 2:38 am

Some others have already given you some good advice, but I'll list the steps I took to prepare for my mortgage, even if some of it is repeating other people's advice.

• Build your credit score as high as possible
• No new inquiries at all – I lost 1/8th of a percent because a shady mortgage broker's repeat inquiries dropped me below the 760 threshold my eventual lender required for their best rate. Doesn't sound like much, but on a multiple-hundred-thousand-dollar mortgage, it makes a difference
• Eliminate debt. For this particular exercise, revolving debt (credit cards and lines of credit) matter more than fixed loans (car, student loan etc). Still, three car loans is a lot, see if you can get it down to two.
• Related to the above, your targets should be no more than 30% utilization of existing credit lines.
• Mortgage lenders also prefer that your mortgage not eat up more than 25% of your net income, although that is somewhat negotiable. Some will go as high as 40%
• Sign up for CreditKarma, or take advantage of free FICO scores through EXISTING credit card issuers. The idea is to keep an eye on your scores and avoid surprises
• When shopping around for mortgage lenders, pick either one lender you're comfortable with or find a broker that will shop your score around to multiple lenders based on only one inquiry. It will take an inquiry to get preapproved, and you want to be preapproved when you're out shopping. But it should only cost one inquiry.
• Many lenders will try to tell you they need to run your credit to see if you qualify for the best rate. If your FICO is 760 or above, you generally do. So when comparison-shopping, simply ask them what the best rate is that they offer assuming excellent credit. If it doesn't match expectations, walk.
• Ask a lot of questions. In my experience, if you catch a lender in a white lie, there could be more severe ones in store. There are a lot of dodgy brokers.
• If at all possible, try to save up a 20% downpayment plus closing costs. Hard to do, especially while trying to reduce debt, but PMI is mandatory if you don't and it's a killer. I learned that lesson on my first house, and avoided it on my second.
• Make sure you have the money for the downpayment sitting in a bank account IN YOUR NAME for at least 3 full billing cycles prior to applying for the mortgage. Otherwise, you will get all kinds of extra documentary burden proving where the money came from.
• Finally, consider a 15-year mortgage. Not only are the rates lower, but the shorter amortization period generally adds up to six-digit savings.
• That said, if you go for a 15-year mortgage, make sure you can afford the higher monthly payments over the long term. If you ever have to go to a 30-year in the future, refi costs will eat up a good chunk of the earlier savings.

Finally, don't worry TOO much about not being W-2. It's true that independent contractors have a harder time

droid
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Re: Any advice on preparation for mortgage

Postby droid » Wed Feb 15, 2017 5:51 pm

TXviking wrote:Some others have already given you some good advice, but I'll list the steps I took to prepare for my mortgage, even if some of it is repeating other people's advice.

• Build your credit score as high as possible
• No new inquiries at all – I lost 1/8th of a percent because a shady mortgage broker's repeat inquiries dropped me below the 760 threshold my eventual lender required for their best rate. Doesn't sound like much, but on a multiple-hundred-thousand-dollar mortgage, it makes a difference
• Eliminate debt. For this particular exercise, revolving debt (credit cards and lines of credit) matter more than fixed loans (car, student loan etc). Still, three car loans is a lot, see if you can get it down to two.
• Related to the above, your targets should be no more than 30% utilization of existing credit lines.
• Mortgage lenders also prefer that your mortgage not eat up more than 25% of your net income, although that is somewhat negotiable. Some will go as high as 40%
• Sign up for CreditKarma, or take advantage of free FICO scores through EXISTING credit card issuers. The idea is to keep an eye on your scores and avoid surprises
• When shopping around for mortgage lenders, pick either one lender you're comfortable with or find a broker that will shop your score around to multiple lenders based on only one inquiry. It will take an inquiry to get preapproved, and you want to be preapproved when you're out shopping. But it should only cost one inquiry.
• Many lenders will try to tell you they need to run your credit to see if you qualify for the best rate. If your FICO is 760 or above, you generally do. So when comparison-shopping, simply ask them what the best rate is that they offer assuming excellent credit. If it doesn't match expectations, walk.
• Ask a lot of questions. In my experience, if you catch a lender in a white lie, there could be more severe ones in store. There are a lot of dodgy brokers.
• If at all possible, try to save up a 20% downpayment plus closing costs. Hard to do, especially while trying to reduce debt, but PMI is mandatory if you don't and it's a killer. I learned that lesson on my first house, and avoided it on my second.
• Make sure you have the money for the downpayment sitting in a bank account IN YOUR NAME for at least 3 full billing cycles prior to applying for the mortgage. Otherwise, you will get all kinds of extra documentary burden proving where the money came from.
• Finally, consider a 15-year mortgage. Not only are the rates lower, but the shorter amortization period generally adds up to six-digit savings.
• That said, if you go for a 15-year mortgage, make sure you can afford the higher monthly payments over the long term. If you ever have to go to a 30-year in the future, refi costs will eat up a good chunk of the earlier savings.

Finally, don't worry TOO much about not being W-2. It's true that independent contractors have a harder time



Thanks for the info!



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