Wauna Credit Union offers mortgages that are tailored for the people and properties that make up Columbia, Clatsop, Western Washington and Pacific Counties. Applying for a mortgage can often seem complicated, confusing and difficult, but it doesn’t have to be.
Here are five steps you can take now to get mortgage ready next year:
Step 1: Create a saving plan
The money it takes to make a down payment can seem like a huge mountain to climb. The key is making a plan to create easy to manage steps. One of the best ways to grow your savings is to put aside money consistently — even if it’s a small amount. Next is identifying your expenses. Be mindful of spending leaks like dining out, excessive entertainment costs, late fees, etc. It’s a good practice to move any surplus to a separate share account specifically for your home purchase. That way you’re not tempted to use your down payment for other items. If your job offers overtime, see if you can pick up extra hours, or look for opportunities to take on a side job.
Step 2: Review your credit report
Now’s the time to look at your credit report. You can use the free credit reports at annualcreditreport.com to see the information that is on your credit report. You can also come in to talk with one of our Real Estate Loan Officers (RELOs). Ensure all the information is accurate, and dispute any errors you find directly with the credit bureaus.
Step 3: Optimize your credit
Payment history is one of the primary factors in credit scoring, so start making timely payments on all of your accounts. Look for any late payments that may be dragging your score down that were reported in error. Next, pay close attention to your balances on your revolving accounts (credit cards or lines of credit). How much you charge compared to your extended limit affects your credit score negatively (credit utilization ratio). Reduce your balances or pay them off whenever possible. To avoid lower scores, keep balances low (below 30% of your limit) throughout the application process, and don’t take on any new credit.
Step 4: Save money for upfront costs
You will need money to cover upfront costs when you start the home buying process. Once you find the right home and decide to write an offer to purchase, the seller will likely require an earnest money deposit (amount varies). Also, as you approach your closing date, you will need to provide funds for the down payment and closing costs which will depend on varying factors like your mortgage type, purchase price, loan amount, and so forth. We recommend you communicate regularly with your lender, so you know ahead of the closing date exactly how much you will need to bring to closing.
Step 5: Gather your documentation
Gather your most recent 30 days of pay stubs, bank statements, and the past two years of federal tax returns. We’ll also take a look at all borrowers’ two-year employment history. If you are self-employed, or not a W2 employee, we will want to look at your tax returns from the last two years. Last year we put together a video going a little more in depth on what we’ll need. You can watch it here.
While the mortgage application process may seem daunting, being prepared ahead of time will help you breeze through the process. The more you know, the better prepared you will be when you meet with our RELOs for the first time.