Michigan’s economy has experienced its ups and downs over the past decade. Population decline and the national housing crisis have driven the prices and mortgage rate down, coming to 4.99%. Over that, the National first-time homebuyer programs recently launched have made homeownership in Michigan more attainable today. To qualify for a Michigan mortgage, you need a credit score of at least 640, a debt-to-income ratio under 45% and your loan is for a single-family home as your primary residence.
Getting a mortgage is like climbing Everest, especially for first-time homebuyers. Even the pandemic has not made it easier; instead, it has tightened the housing market, owing to which lenders are looking into mortgage applications more cautiously. Every lender has its own set of considerations for deciding whether to approve the application or not. If you fit the lender’s criteria, you might get approval quickly; otherwise, you will likely get rejected. Therefore, if you are planning to apply for a mortgage, you need to follow the procedure as follows:
Check your credit score.
The first and foremost thing you need to do is- check your credit score. This is what lenders will do in the first place as soon you reach them, so you should too. Your credit score plays a vital role in getting you the mortgage approval. So before you try proving your creditworthiness to lenders, analyze your credit report. Remember any negative item on your credit report harms your credit score and your chances of getting the mortgage. So if your credit report is not accurate or there are some negative elements, take some time and try to clean them up.
Check your affordability
Now that your credit score is in good shape sit down and calculate how much you can afford. Determining your budget is the second important thing in getting a mortgage. You obviously would not want to get stuck into a mortgage payment that limits your life and keeps you from accomplishing your goals. Therefore, before diving deep into the process, determine what you can realistically afford to pay. And in your calculations, don’t forget to include mortgage principal, property taxes, mortgage interest, utilities (water, gas, electricity, cable, etc.), repair and maintenance costs.
Determine which type of loan you want
Next comes determining which type of mortgage loan would be best for you. Conventional loans are the best for homebuyers with a good credit score and a significant amount of money saved up for a down payment. However, if you do not qualify for a conventional mortgage loan or have failed to meet the specific requirements, government-insured loans are a good option. Besides this, another big consideration is choosing a fixed interest rate (that will remain fixed for the entire term) or variable (that may vary).
Complete your paperwork
Lenders may ask you to show your assets like retirement accounts, savings accounts, taxable investments, income proofs, valid proofs of your assets, and even documentation related to outstanding debts (if any). Checking all these things assure the lenders that you will be able to make your payments even if you run out of money or get trapped in some financial trouble. So make sure you keep all your documents in hand.
Look for the best mortgage rates and get pre-approval
Once your documentation is in order, it’s time to search for the best rates available in the Michigan mortgage market and apply for the pre-approval. During the pre-approval process, the lender will analyze your assets, credit history, documentation and tell you how much they can lend you and at what interest rate. Getting pre-approval done will help you know the amount of money you will receive, which ultimately helps you narrow down your property search.