How is Your Credit?

In order to put yourself in the best possible position to afford a home, receive the lowest possible mortgage rate and get insurance for your new house you need to check your credit rating. This will take preparation on your part. Good credit helps you in many ways, including getting a mortgage at a good rate. Depending on the state and the insurer, it may also help you save money on your homeowners insurance. Get a copy of one or all of your credit reports. Make sure they are accurate and report any mistakes immediately. The credit report helps you see how your credit standing compares to others. If your credit is not as good as it should be, begin now to improve it.

Check Your Home Insurance Claims-Filing History

If you have owned a home before it might be a good idea to get a copy of your loss history report, such as a CLUE report from ChoicePoint or an A-PLUS report from Insurance Services Office (ISO) http://www.iso.com. This is a record of home insurance claims you have filed. If you have not filed any insurance claims in the past five years, you won't have a loss history report. Depending on the property you ultimately buy, you will most likely not have any trouble getting insurance. The better your claim record, the less you may pay for insurance. This can also be important if you are selling the home you are currently living in. A past claim does not have to be a problem. Repairs or improvements, if done properly, can make a property more attractive to buyers and insurers.

If you are currently renting, it's important to have insurance for your personal property. Your landlord's coverage will not cover the things you own. If you haven't owned a home before, it might be helpful to have a history of insurance when you go to buy your first home.

Keep Your Money In One Place

When you go to apply for your mortgage, there are several things involved in the approval process. When the mortgage broker begins to review your home loan they will want to know how you will provide the funding for your down payment and possibly the funding for your closing costs. It is important to keep your money in one place because they will want to see statements on all of your accounts. Depending on the mortgage broker and their tactics they may want to see 3 or 4 months past history of all your accounts. Some of the things they will look at includes: checking accounts, savings accounts, any retirement accounts (including 401k programs), stock statements, mutual funds, and/or money market funds. In most cases you will have to produce receipts of withdrawals and deposits on all these accounts. If there is a lot of traffic with large deposits and withdrawals in these accounts this could have a negative affect on your home mortgage approval process. The idea is to provide for you mortgage broker a sense of security in your assets and funding, moving your money around frequently will show instability in your ability to fund your down payment or closing costs.

Your Employment

The best advice to give is don.t change your jobs or make a big career change before applying for a home loan. You want to show the mortgage broker that you have had a steady history of earning income at a steady rate. Any gaps in your employment, such as lay-offs, being fired, quitting or a changing jobs can show the mortgage broker that your income has an inconsistent history. Furthermore if you have decided to become self-employed, it is better to hold off on that change before purchasing a home. Most lenders will want to see a 2 year history of earnings for most self-employed individuals. If you have a job where a high percentage of your income is generated from bonuses, commissions, and/or overtime then your lender will want to know how reliable they are. Most of the time, your bonuses, commissions and overtime will vary greatly over the years. Your lender will want to look at your most recent W-2 statements and the previous years tax returns.

Interest Rates

It is important to keep a close watch on interest rates as you prepare yourself for purchasing a home. Interest rates fluctuate often and can become very volatile at times. Obviously the lower the interest rate the lower your monthly payments will be. You do not want to get caught in a higher monthly payment because you were over anxious at purchasing a home and in turn got yourself locked into a higher interest rate on your mortgage. It is also important to understand the different interest rates with each type of mortgage.

Of course everyone wants to buy their home at the cheapest possible price available. However attempting to time the market in order to get a home for below-value may be a waste of time. Nobody can accurately predict the real estate market. Generally it is a slower market when interest rates are high, because fewer people want to take out mortgages with such high interest rates. Also when interests rates are low it is usually a period of high volume because more people are buying and applying for mortgages or re-financing.

You should start checking out current interest rates as you begin to plan to buy your new home. Mortgage rates tend to follow Wall Street and the economy. By keeping yourself informed of market trends and other economic indicators you will have a better knowledge of the mortgage rate trends and have a better chance of getting a better rate.