Want to buy a home next year? Here's how to make that happen.
With mortgage rates sitting at record lows, buyers have been itching to get a piece of the action by purchasing homes. And despite the challenges they've run into -- inflated home prices and limited inventory -- there's a good chance mortgage activity will stay strong going into 2021.
If you're thinking of buying a home next year, there are steps you can take to make the mortgage process as easy as possible. Here are three expert tips from Bill Banfield, executive vice president of Capital Markets at Rocket Mortgage, that every applicant should follow.
1. Find a lender that offers upfront underwriting
Underwriting is the process of verifying an applicant's financial information in the course of granting a loan, and it's a standard part of the mortgage process. Many lenders don't do upfront underwriting -- they do it midway through the application process. But some lenders offer upfront underwriting, and given the state of the housing market, that's a benefit worth pursuing.
As Banfield explains, "In today's competitive housing market, with record demand and limited inventory, buyers may experience a bidding war after they make an offer. To ensure they have one of the best offers on the table, they should find a lender that will underwrite their mortgage up front. Rocket Mortgage offers this through a Verified Approval, which strengthens a client's offer by verifying their credit, income, and assets when they first apply for a mortgage -- allowing them to compete with the cash offers."
Given that many home purchase offers over the past few months have been subject to bidding wars, upfront underwriting could really give you an edge. And it could save you money if a seller opts to accept your solid offer before entertaining others.
2. Stay in touch with your lender
Mortgage applications have boomed due to the way rates have trended, so many lenders are overwhelmed these days. But one of the best things you can do to move a mortgage application forward is to stay in contact with your lender and respond quickly when you're asked to provide documentation.
"Home buyers should maintain communication with their lender and supply all necessary documentation to keep the mortgage underwriting moving along smoothly," insists Banfield. "For those who have been impacted by COVID-19, consistent engagement with their servicer can ensure their credit is protected and that no late fees are charged -- important factors that may impact future mortgage transactions."
3. Keep your credit score in great shape
Your credit score is a major factor that lenders will take into account when deciding whether to grant you a mortgage, and whether you're eligible for a top rate. That's why it's so important to check on your credit score before submitting an application, and then make sure it stays solid until your home loan is finalized.
"Prior to applying for their next mortgage, home buyers should make sure they are current on all of their accounts," explains Banfield. "Additionally, they should avoid new credit inquiries and taking on new debt during the mortgage process. This can delay the loan closing or even cause clients to no longer qualify for the mortgage."
Remember, getting approved for a mortgage does not guarantee that your loan will actually close. If you go out and rack up a bunch of new debt, or do something that changes your financial picture for the worse, you could end up seeing a mortgage fall through.
While housing inventory may not open up substantially at the start of 2021, there's a good chance more homes will come onto the market as the year progresses. If you want to increase your likelihood of not just getting a mortgage, but snagging a competitive rate, follow these important insider tips. With any luck, they'll make the process run smoothly from start to finish.
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