By: Edward McCarthy
President: Sell By Owner Listings, Inc.

Taking Out A Mortgage? Relax.

For most consumers, taking out a mortgage is the single largest transaction that will ever be made in their entire life. Taking over hundreds of thousands of dollars in responsibility is an intimidating task. It's no wonder that many first-time home buyers are afraid of taking out a mortgage.

The best thing first-time, and even second-time and third-time, homebuyers can do is equip themselves with knowledge about mortgages. Through becoming familiar with the process of obtaining a mortgage, your anxiety can be eased a little.

Prepping For Your Application

Before applying for a mortgage, homebuyers should prepare themselves credit-wise. Since credit history will be a major factor in a lender's decision to extend you a mortgage loan, you want to make sure your credit is in the best shape possible.

Avoid making any large purchases at least six months prior to applying for your mortgage. The lender wants to be sure you can handle the mortgage payments. Don't take on any debt that can cause a lender to suspect you don't be able to pay your mortgage.

Get copies of your credit report. If you are applying with a co-signer this person should do the same. Review your credit report for any inaccurate information. Should you find entries that do not belong to you, are older than seven years, or are incorrect, dispute these inquiries with the credit reporting bureaus. Your credit report should come with information about the dispute process.

Pay off as much of your debt as possible. The lower amount you have in debt, the better chance you have at obtaining approval.

Don't change jobs six months before applying for the mortgage. Steady employment history is one of the factors lenders use to determine your risk as a borrower.

Save up as much for a down payment as you can. The more of your own money you can put down towards the loan, the likelier you are to be approved. This may not be a consideration for you if you have excellent credit, however, if you have less than perfect credit, your down payment can make the difference in approval and denial.

Things You Should Provide

When you apply for the mortgage, the lender will ask you for certain documents to determine your eligibility for the mortgage. In general you will need to provide the following documentation at the time you apply for the mortgage:

• Past three months of bank statements for checking and savings accounts

• Past three months of investment statements

• Proof of employment and income: pay stubs, W-2 withholding forms, etc.

• If you are self-employed, balance sheets and tax returns
• Consumer debt information
• Any divorce settlement papers, where applicable

Lenders usually ask you to sign a form authorizing them to verify information about your bank accounts and income as well as to obtain a copy of your credit report. If you have made an offer on a house already, the lender will need a copy of the purchase contract and a receipt for any deposits you may have made with the seller.

Once you are familiar with the process of applying for a mortgage, you can rest a little easier. Taking steps to ensure approval will help ease some of your nervous feelings.

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