BMI Federal Credit Union
Preparing For a Mortgage
Three Basics For Qualifying for a Home Loan
Your Credit Score
A mortgage is the largest loan most people will take out in their lifetime, so credit history is carefully considered by lenders. Not sure where you stand? Get your free credit report at annualcreditreport.com.
Do you have a strong history of on-time loan payments? If there are any missed or late payments, you will want to get and stay current on any active loans. If you have any old or open collection accounts, you will want to take care of them so they are reported as closed.
Your Debt-to-Income Ratio
What percentage of your monthly income is already committed to other loans and payments? Is there room in your monthly budget for a mortgage payment? You may want to consider reducing your current debt load by paying down the balances on credit cards or other active loans. Do not agree to any new loans in the months prior to your application for a home loan. Watch this video from The Consumer Financial Protection Bureau to learn more about debt-to-income ratio.
Your Down Payment
Check with your lender for the down payment they require. Most will want you to have anywhere from 5% to 20% of the purchase price available for a down payment. Ask about special home loan programs which may require a smaller amount and/or supply other incentives. For example, the First Time Home Buyer program at BMI FCU allows for a 3% down payment and does not charge PMI (Primary Mortgage Insurance). Plan on saving up a bit more than the minimum, as there are often additional costs such as appraisal and home inspection fees you will need to consider.
Improvement in one of the three items above can lead to progress in the other ones! For example, paying down debt can improve your credit score and can also free up money that can be added to a monthly deposit to your down payment fund.
Ready to learn more?
- The Consumer Financial Protection Bureau offers a roadmap to home buying. This
checklist guides you through the process, from reviewing your credit report to the
closing on your new home.
- Attend a free financial education workshop. Check dates, times, and register online or by calling 614.707.4000.
- Explore our Home Ownership Playlist to understand what you need to consider.
Learn about the process of buying a home and how to find a mortgage that fits your
needs and budget.
- Check out our award-winning Financial Education Program to help you get ready for this big step of becoming a homeowner.
Ready to take the next step?