Right now the mortgage lending industry is going through a tough time. As a result, lenders have tightened restrictions on both issuing new mortgages and refinancing, but there is hope. Here’s how to get financing for your new home if you have been impacted by the coronavirus.
Before you begin the mortgage application process, you need to have a concept of what you can afford for a down payment on your new home.
You should strive to put down 20% of the purchase price of the home to avoid additional monthly charges from your mortgage lender in the form of PMI, or Private Mortgage Insurance. Once you know your down payment goal, you’ll want to put together a thorough and detailed budget.
Your budget will give you an idea of the excess income you can use to meet your down payment savings goal, as well as in the following steps.
SHORE UP YOUR DEBTS
Now that you know your savings target and have created your detailed budget letting you know your additional available income, you want to put that additional available income to good use.
The first step is to try paying down or eliminating as much of your existing debt as possible, especially if you’ve been impacted by the coronavirus. Right now, mortgage lenders are risk-averse, meaning they’re trying to only lend money in extremely low-risk situations where they are certain they will get their money back. By reducing or eliminating your existing debt, you’re making yourself a more attractive applicant to your chosen lender.
It’s also a good idea to request your annual free credit report from the credit rating agencies to check for any mistakes or oversights you have forgotten in your credit history. You don’t want to approach the end of the application process only to find out you were denied due to an old, outstanding debt from a decade ago.
TAKE YOUR TIME
While traversing the mortgage application process it’s important to take things a step at a time and understand what’s happening as you move along. Applying for a mortgage can be a confusing and overwhelming ordeal for some people, but then you add the effects you are experiencing after being impacted by the coronavirus and you can begin to rush through everything just to get it over with.
Be careful not to lose sight of the details and do ask your lending agent any questions that come up while they work with you from application to closing, and beyond.
DOUBLE-CHECK YOUR NUMBERS
Everyone is currently enduring some form of hardship related to the coronavirus. This change to our norms has disrupted our routines, and this disruption can make us a bit accident-prone.
Going through all of your numbers a few times to check for mistakes will do you nothing but good. Start with your budget to make sure your circumstances haven’t changed and could lead you into a difficult financial position.
One more thing to consider is that you want to have enough savings to not just cover your down payment but also additional expenses. Whether these expenses are from moving or needing to purchase an appliance or two, expect the unexpected.
ONLY SIGN WHEN YOU’RE COMFORTABLE
You’re going to be doing a lot of paperwork, and slapping your signature here, there, and everywhere through closing. If at any point in time you aren’t sure of something or your instincts tell you to hesitate a moment, then listen to them and take a breath.
Your chosen lender is there to work with you and understands applying for and getting a mortgage right now is a stressful endeavor.