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MORTGAGE PREP 101

Buying a home is likely the single largest purchase you will make in life. Exploring the following resources will answer many questions you may have about how home loans work, and important information for getting "mortgage ready".

Credit Assessment

Your First Steps

  • Establish A Credit History: You can do this by getting an auto loan, credit card (secured or unsecured, or an installment loan. It is important that you start slow and not take on too much credit too quickly. If you use a credit card, try to pay it off each month. And of course most importantly, make your payments on time!

  • Have A Checking And Savings Account: These will show proof of your income deposits and will also show how responsible you are with your spending habits. If you utilize Overdraft Protection with your bank or credit union, try not to use it on a regular basis.

  • Set A Budget And Stay Within It: As is often quoted, "practice makes perfect". This applied to finances as well. It's important that you create a budget each month that allows you to put money in savings and build a "nest egg". As a homeowner there will likely be some unexpected costs such as repairs or replacing broken appliances.

First Steps
Credit Score

How Your Credit Score Affects You

Your credit score affects your interest rate, whether you are eligible for certain loan products, and terms. If you have a lower credit score, it is essential to improved your credit score to receive more favorable loan terms.

Please Note: Total Home Lending. and its employees do not provide credit repair or credit counseling services. You should seek independent information and advice before taking any course of action. Additional resources are listed at the bottom of the page.

Credit Score Facts:

  • Scores can range from 400-850. Some loan programs will allow credit scores below 600, but ideally your best options will be available with scores over 700. 

  • Credit scores are sometimes referred to as a FICO score. 

  • Mortgage lenders will pull credit scores from 3 credit bureaus (Equifax, Experian, and Transunion). Your middle score, not your highest or lowest, will be used to determine your eligibility.

  • Not all credit scores are the same. We often hear a customer tell us their credit score which they received from a credit monitoring service, such as Credit Karma. Your score on these services may not match the credit scores we pull. 

What Makes Up A Credit Score And The Weighted Factors:

  • ​35% - Payment History

  • 30% - Total Amount Owed

  • 15% - Length Of Credit History

  • 10% - New Credit Accounts Or Credit Inquiries

  • 10% - Types Of Credit Used

Improving Your Credit Score:

  • Only apply for credit when needed.

  • Always pay bills on time.

  • Keep balances low on credit cards (less than 30% of the credit limit is ideal)

  • Pay off debt rather than moving it around.

  • Re-establish credit if there have been problems in the past; opening new accounts responsibly will improve credit scores over time.

How Long Does It Take To Rebuild A Credit Score?

Many credit score "quick fix" articles are available online. But Experian.com notes that the length of time depends on the seriousness of the reasons for a lower score. You can dispute errors and old negatives with the credit bureaus.

Renting vs. Buying

The Benefits Of

BUYING

TAX SAVINGS

Mortgage loan interest is deducted from your state and federal income taxes. A portion of your property taxes and closing costs may also be deducted.*

STABILITY

Fixed mortgage payments (principal and interest) will not change during the loan term, whereas rent payments may increase.

BUILD EQUITY

Owning a home long term allows you to build equity, increasing your investment. You do not gain any equity by renting...but your landlord does!

* Please consult a tax professional for tax advice

The Benefits Of

RENTING

FLEXIBILITY

Renting may be the preferred option for those planning or needing to make a move in the near future.

LITTLE OR NO MAINTENANCE

Renters are often able to rely on landlords and property managers to pay for and make necessary home repairs, including yard maintenance and snow removal.

UTILITIES MAY BE COVERED

Some utility expenses may be included in the monthly rent payments.

Rent vs Buy
Pre Qual vs Pre App

Pre-Qualification vs. Pre-Approval

Too often the terms "pre-qualify" and "pre-approve" get clumped together as one in the same. While there are some similarities, they have very different meanings. Below are the differences.

Pre-Qualified

Getting pre-qualified is a quick first step in the process. We will gather information on your overall financial health, including your debt, income, and assets. We will go over your financial goals and talk about the mortgage programs that may best suit your needs.

Getting pre-qualified does not mean you are approved, nor does it carry much weight in negotiating with a seller. A pre-approval is the next step.

Pre-Approved

Getting pre-approved is much more involved and will require you to provide some documentation. The best part is being pre-approved gives you and the seller the peace of mind that you are a strong buyer.

We will ask you for some income and asset documentation, along with information and permission to pull your credit report. We will then run your loan through our Automated Underwriting System and will give you some details of your approval.

Items Needed For Pre-Approval

Use the following checklist to be sure you have what you need for your loan. Other documentation may be required.

  • Most recent two years' federal tax returns with ALL schedules.

  • Most recent two years' W-2's or 1099's.

  • All paystubs for the last 30 days (showing your name and year-to-date earnings.

  • Copy of your driver's license.

  • Most recent two months' bank/asset statements. (-Must include ALL pages, -Must be bank generated statements that include your name, account number, and the bank's name, -CANNOT be transaction history printouts from accessing your account online unless they have your name, account number and bank's name).

  • If self-employed provide: (-Most recent two years' business tax returns with ALL schedules, -Most recent two years' K-1's/1099's/W-2's).

  • If you have rental property, provide copy of current rental agreement and your most recent two years' tax returns with ALL schedules.

  • If divorced, provide final divorce papers, including child support/alimony agreement and final decree (signed by the court) and all revisions.

Pre-Approval
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