Deciding to become a homeowner is stressful for most people. There are also several factors to consider before making a purchase, including job security, affordability, and where to buy a property. These are all very valid concerns that require further scrutiny, and it is important to treat this decision as you would treat any other life event of importance. You need to be informed about the real estate market, learn more about your finances, create a timeline, and try to make a budget that will help you make mortgage payments before you decide to take the plunge.

Let’s examine some other basic factors you need to take into consideration before taking a mortgage:

1. Ensure that all debt is paid off
Lenders may insist that you shouldn’t have a large portion of gross income committed to servicing revolving debt, so you should pay off credit card debts, car loans, and other debt that may have accumulated to make your financial health look much better. It will also work toward bumping up your credit score and helping you get a faster approval and better mortgage rate so that you end up paying less for the same loan amount. Banks and other financial institutions are primarily concerned with your ability to pay back the loan, which is what governs the agreement while taking a mortgage.

2. Keep your taxes in order
Lenders will insist on seeing the information of the federal taxes paid in the past two years. You will have to ensure that your taxes are filed for the present year and that the information is corroborated with the Internal Revenue Service (IRS). As such, you will also need to sign a release allowing the lender to verify the same information with the authorities. Your records and documents that are furnished to the lender must match the tax filings made before the IRS.

3. Avoid any large purchases
It is important to manage your finances well throughout the process as the lender will monitor them even after you receive loan approval. This makes it important to avoid any large exorbitant purchases while taking a mortgage until you become a homeowner. Avoid taking on more debt to finance the furniture of the house or buying something like a car. After the loan approval, the lender may ask for more statements as and when they become available, and they will enquire about any large unforeseen expenses. Before the loan closes, the numbers you have committed to on paper should match your bank balance, and any large deviation would invite scrutiny.

4. Educate yourself
The most important factor in the entire process is to educate yourself about your finances and understand your debt to income ratio. A loan officer sensitive to your needs is the best bet for getting a good deal. It is also important to not overextend yourself by taking on too much debt. Monthly mortgage payments often go up when taking adjustable-rate mortgages as opposed to fixed mortgages, and you should be prepared for any eventuality.