The one house everybody wants. The one house that everybody dreams of growing old in. 24 hours. 365 days. And an average of thirty-two viewings before finding the house of your dreams.
If only it was easy. If only it was as simple as falling in love, signing the papers, and putting an offer down. The home mortgage process is as fulfilling as finding a house. Don’t stress; we are here to provide you clarity on the process so you can fall in love and sign the papers in no time.
Here is a no-fail guide to all things mortgage and the home loan process.
Knowing How Much You Can Borrow
To determine this, lenders evaluate your credit score, income, debts, and assets. Generally, lenders will look at your monthly income and subtract your monthly expenses, such as credit cards and car payments.
From there, they can assess your ability to make mortgage payments. To figure out what may be a comfortable loan amount for you, the lender will consider your other economic obligations.
Knowing the estimated loan amount can help you to find the right property and narrow your housing search. Ultimately, it is important to understand how much you can borrow before you start the home loan financing process.
Understanding Interest Rates and Terms
Interest rates are the costs associated with taking out a loan, and terms refer to the length of the loan and payment structure.
Often, fixed-interest rate loans offer the lowest rate. This type of loan has payments that don’t fluctuate with interest rate changes. Also, the entire loan balance must be repaid over the terms of the loan, typically 15 or 30 years.
Adjustable rate mortgages start with a lower initial interest rate. Keep in mind it comes with the risk of higher monthly mortgage rates after the set fixed-rate period ends.
Fulfilling Paperwork Requirements
Securing a home loan requires more than just making a down payment. Before your loan is finalized, it is essential to fulfilling the paperwork requirements.
Typical paperwork needs include a loan application, tax returns for the past two years, proof of income, credit reports, and bank statements. If you are unfortunate enough to have a collection or bankruptcy on your credit report, a letter of explanation may also be requested.
It is important to provide all of the requested information in a timely fashion. Working with a loan officer to complete paperwork in a timely manner is essential to having your loan request approved.
Knowing what paperwork is expected, and having it ready to submit, will keep your loan application from being derailed.
Securing Your Lender and Making the Purchase
To be pre-approved, you will provide the lender with your financial and personal information, and the lender will determine if you meet their lending criteria and inform you of the amount they are willing to loan.
Once you find the property you want to buy, you should contact your lender to lock in your interest rate. On closing day, you will finalize all the documentation, present any required funds, and receive the keys to your new home. Click for more info on ways you can save when you buy your house.
Simplifying Home Loan Process
The home loan process can be overwhelming and intimidating. But with the right guidance and steps, anyone can gain a better understanding of the process and make a more informed decision.
Now that you have a better understanding of the process, it’s time to get out there and start shopping for your first home loan!
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