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Getting a mortgage can be an exciting yet stressful process. While you likely started preparing many months in advance, the final month leading up to your closing date is critical. Here are some important things you should do in the final weeks before getting a mortgage:
Review Your Finances
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Check your credit score and report again. Get a copy of your credit report and look it over for mistakes. If you find any, file a dispute with the credit bureaus. You can get the best mortgage rate if you keep your credit score high.
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Avoid taking on new debt. Lenders will check your credit right before closing, so avoid applying for new credit cards or loans. Large purchases could also impact your debt-to-income ratio.
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Verify your down payment funds. Make sure you have enough money in your account for the full down payment. Lenders may ask for updated bank statements at closing.
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Don’t make any big purchases. Don’t buy big things like cars, appliances, or furniture until after the closing. Major purchases could raise red flags with underwriters.
Get Organized
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Gather documents. Gather your bank statements, tax returns, pay stubs, and any other documents your lender may ask for. This will make the underwriting process smoother.
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Create moving folders. Get files or binders to keep all your mortgage paperwork organized. This will make the signing process easier.
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Prepare for closing costs. Closing costs average 3-5% of your loan amount. Have funds ready to cover the down payment, fees, prepaid interest, and escrow payments.
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Book movers and cleaners. If moving, book professional movers and cleaners for move-in/move-out dates. Confirm dates line up with the closing timeline.
Communicate with Your Lender
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Tell them about job changes Inform your lender immediately if you switch jobs Employment gaps could impact loan approval. Provide an offer letter from the new employer.
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Disclose major account transfers. Let your loan officer know if you move your down payment to another bank account. Large withdrawals or deposits should be explained.
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Ask about rate locks. Decide whether to lock your interest rate or float it until closing. Locking in guards against rate increases.
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Review final loan estimates. Compare the final Loan Estimate and Closing Disclosure forms to the initial ones. Ask the lender to explain any discrepancies.
Prepare Your Property
If purchasing:
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Schedule a final walkthrough. Do a final walkthrough 1-2 days before closing to ensure repairs were completed and the property is in the agreed-upon condition.
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Change utilities to your name. Contact utility companies to transfer electric, gas, water, internet over to your name starting on the ownership date.
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Update insurance. Notify your insurance company about the change in property ownership and provide them with mortgage company details to have them listed on the policy.
If refinancing:
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Consider an appraisal waiver. Ask your lender if you qualify to waive the appraisal, which will speed up the process and save you money. Recent sales activity for your home can stand in place of an appraisal.
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Inspect your home. Do a thorough inspection inside and outside your home to identify any repairs needed before the appraiser visits. Tackle minor fixes like leaky faucets, damaged walls, lawn care.
No matter what type of mortgage, keep your loan officer informed throughout the process. Getting preapproved early and meticulously preparing in the final weeks will help ensure a smooth closing. Maintaining open communication with your lender and staying organized will give you greater peace of mind leading up to your mortgage closing date.
What financial elements are considered in the mortgage process?
How do you know you’re really ready for a mortgage? There are some signs that might point to yes, according to Freddie Mac. These include:
- Your credit score: Your credit score is one of the most important things that determines whether you can get a mortgage. The company Freddie Mac says that if your credit score is 661 or higher, you are creditworthy. If your score is between 600 and 660, you might be almost ready for a mortgage but not quite. It’s likely that you’re not ready for the extra debt if your score is 599 or less.
- Your debt-to-income (DTI) ratio: DTI is also important, and there are two ways to measure it. The front-end ratio, which shows how much your monthly mortgage payment will be compared to how much money you make each month, should be 25 percent or less. You can have a higher back-end ratio if you have a lot of debt, like student loans and car loans. However, most lenders want it to be no more than 36 percent, and 43 percent is the highest it should go.
- No foreclosures or bankruptcies: These marks on your credit report should not show up for at least seven years.
- On-time debt payments: There shouldn’t be any debt payments on your credit report that are 90 days or more past due.
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Bankrate’s take: This isn’t to say you won’t get approved for a mortgage if you have a lower credit score or don’t meet all of the other criteria — you just might be stretching yourself too thin or unable to achieve other financial goals.
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- The best way to get good terms on a mortgage is to get your finances in order before you apply.
- Lenders decide if you are creditworthy by looking at your credit score, your income and other assets, your debts, how much you owe compared to your income, and your work history.
- Your financial situation can get better if you raise your credit score, lower your debt, and save more.
As a first-time homebuyer, you might have little income or savings to work with. That doesn’t mean you won’t qualify for a mortgage, however. Here are three ways to prepare your finances before you apply for a home loan.
Home Mortgages 101 (For First Time Home Buyers)
FAQ
Is it good to be a month ahead on mortgage?
Here are some reasons to consider paying off your mortgage ahead of schedule: You want to save on interest: By making extra principal payments, you’ll shorten the time it takes to repay the loan, saving money on interest.
What is the 3 7 3 rule in mortgage?
The 3-7-3 rule, also known as the TRID (Truth in Lending-RESPA Integrated Disclosure) Rule, dictates specific timelines for mortgage disclosures and loan closing. It ensures borrowers have sufficient time to review important loan details before finalizing their mortgage.
What to do before you get a mortgage?
Preparing to shop. Get your money situation in order. Assess Your Spending. Figure out how much you want to spend. Determine Your Down Payment. Decide How Much You Want to Spend. Consider whether it’s the right time for you to buy. Exploring loan choices. Choosing a loan offer. Closing on your new home.
How much income do you need to be approved for a $400,000 mortgage?
If your household income is $100,000 or more, this method might help you get a $400,000 home. Another rule of thumb is the 2028 rule, which says that you shouldn’t spend more than 2028 percent of your gross monthly income on your housing payment.