Home » The Mortgage Maze: How And Where Do I Start?
How and Where Do I Start?
Home buying can be fun, although there are some aspects of the journey can be more stressful than others. The mortgage process can be one of those.
How do I apply for a mortgage?
Applying for a mortgage is simple, but you’ll need some information to complete the application.
1. First, you’ll need to know your monthly income.
2. Second, you’ll need to know the sum of your total monthly debt payments.
3. Third, you’ll need to know your credit score (though if you don’t, the mortgage company will pull your credit to obtain this). Fourth, you’ll need to know how much money you can put down on your home, and finally, it would be great to know how much house you can afford so you have an idea of the amount of the loan you’ll need.
How do I get prequalified for a mortgage?
Getting prequalified is the initial step in the mortgage process. It’s simple and will give you an idea of how much home you can afford and what you may have to do to qualify for the home you want. You supply a bank or lender with your overall financial picture, including your debt, income, and assets. After evaluating this information, a lender can give you an idea of the size of the mortgage for which you qualify. Prequalification can be done over the phone or on the internet, and there is usually no cost involved.
How do I get pre-approved for a mortgage?
Getting pre-approved for a mortgage is more involved. Initially, you’ll need to complete a mortgage application and supply income, employment, asset, and debt documents along with permission to pull a credit report on everyone on the mortgage. With this information, the lender can tell you the amount of mortgage for which you’ll be approved and the interest rate you’ll pay for the loan. Along with pre-approval, you’ll receive a conditional commitment from the lender in writing for a specific amount.
What is the best type of mortgage for me?
With the many different kinds of mortgages available, finding the one that is right for you may take a little time. The good news is that the information is out there to help you make a fully informed decision. If you’re looking for security and stability in a loan and plan on staying in your home for ten years or more, then a fixed-rate mortgage may make the most sense. If you’d like lower payments the first few years you’re in the home, with an increase in your payments after five, seven, or ten years, then an adjustable-rate mortgage may make the most sense. A conventional loan (one that is backed by the US Government) may make sense if you don’t have a sizeable down payment. If your home qualifies for an FHA loan, this may be the perfect type of loan for you, and if you’re a veteran, you’ll want to look into the advantages of a VA loan. While you’re getting pre-approved, your lender should explain and explore these options with you
Once I’m approved, can anything change my status?
One of the first things your mortgage lender will tell you once you’re pre-approved is to make sure you do not take on any additional debt. They’ll also ask you to pay all your current debt obligations on time. Any change in your debt-to-income ratio or your payment history at this point will lower your credit score. This could nullify the conditions of your pre-approval agreement with your lender and probably ensure a higher interest rate (and thus, a lower loan amount) on your mortgage.
What documentation will I need for a mortgage?
To apply, you’ll need documentation showing your employers for the last two years, and pay stubs from the previous 30 days. You’ll also need W-2 forms for the last two years, tax returns for the same period, bank statements for the previous three months, proof of pension, or any other income-producing assets. You will also need child support or alimony amounts (if applicable) and information on any debts such as car loans, student loans, or credit cards. You’ll also need to provide the contract you’ve signed with the home builder to purchase the home, and a copy of the earnest money check you wrote to them.
What is the difference between prequalification and pre-approval?
The mortgage prequalification process will give you an idea of how much home you can afford. The result of a prequalification process is to provide you with the information you need to begin your new home search. Pre-approval is a more formal process that will take a more in-depth look at the home you want, your financial fitness, and the ability to repay the loan. It results in a commitment from the lending institution that indicates that they’ll fund a home loan based on the information gathered during this process provided there are no changes to the status of the borrower. Builders tend to take shoppers with a pre-approval letter from a mortgage company m re seriously than they do shoppers with a prequalification.
Are there any mortgage programs specifically designed for first-time homebuyers?
The term first-time homebuyer is a marketing phrase that mortgage companies use to attract business from prospective borrowers. These are often loans with some incentive provided by the mortgage company or builder to entice the borrow. There are some states and cities that offer down payment assistance or slightly lower interest rates to first-time homebuyers who meet specific criteria. Ask your mortgage lender if your state or city has any first-time homebuyer programs for which you’d qualify before you complete your mortgage application.
The mortgage process can sometimes take time; but it is a crucial part of home buying. The sooner you start this process, the better chance you have of managing your wants and needs and keeping them in line with your budget!