The housing market is hot! You’re ready to jump in and buy a home! But, either this is new territory or you’ve purchased a home before but the rules have changed. What you want most of all is a successful transaction. Here’s how to get there.
First, find a real estate professional to guide you through the process. An experienced agent will understand your goals, work with you to find homes that meet those goals, and know exactly what is required each step of the way.
Next, be a prepared buyer. This is especially true when it comes to choosing a mortgage lender and applying for a loan. The mortgage process is one particular area can derail the home transaction if not handled properly.
FINDING THE RIGHT MORTGAGE BROKER
Shop aroundThe right mortgage lender is critically important. Who you choose will make a difference in whether or not the process goes smoothly. Plus, once you are approved for a mortgage, you are looking at 15, 20, or 30 years (depending on the plan you choose) with the same mortgage. Think long term.
Do your homeworkIt's very important to find a lender you trust and one who you know will work hard to achieve the best possible outcome.
Compare rates and compare companiesWhile getting a good interest rate is important, you should also choose a lender who is an experienced professional with a proven track record.
Questions You Should Ask
- Which type of mortgages do you offer? What are the pros and cons of each option?
- What is the difference between your fixed rate mortgage vs. an adjustable rate mortgage
- What credit score do I need to qualify for a mortgage with you?
- Which type of mortgage is best for me? Why?
- How do you determine how much I can borrow?
- How much down payment do you recommend I pay? What are the implications of paying more or less?
- Do I qualify for any down payment assistance programs?
- What is my interest rate? What is the annual percentage rate?
- What are the estimated closing costs? How many points does the rate include? What are you charging for fees? What is the loan estimate? Ask for a closing disclosure detailing costs. Compare this to the loan estimate.
- Do you handle underwriting in-house?
- What will my monthly payments be? Is there a prepayment penalty?
- What is our average loan processing time?
- What happens if my appraisal comes in low?
- Can I get pre-qualified before I start home shopping?
- What are the conditions regarding PMI (private mortgage insurance)?
- Can I lock in the rate? If so, when and for how long? Do you charge for this?
- Is there anything that might delay the closing process?
- When we can expect to close? What do I need to bring to the closing table?
GET YOUR FINANCES IN ORDER
Underwriters are like detectives. Their job is to make sure you are who you present yourself to be. Subsequently, they will check your credit score, review the home appraisal, and make sure you have been truthful in all of your financial claims.
To keep the process on track, get your papers in order. Lenders require documents that will prove you can repay the loan. (This applies to both you and your spouse if applicable.) Always answer their questions and respond to their correspondence in a timely fashion. The documentation may include but is not limited to the following:
- Valid driver's license or state issued ID
- Copies of your checking and savings account statements
- Proof of other assets
- Paycheck stubs
- Credit card accounts
- Proof of employment
5 FACTORS THAT MAY AFFECT YOUR MORTGAGE OUTCOME
Marital Status: There are two important documents in a home closing: the mortgage and the deed. The mortgage is the document that outlines the terms of paying back borrowed money. The deed is the document which lists who actually owns the property. To ensure that a home is correctly transferred between parties, title companies will review marital status to verify legal ownership of the property. They do this to properly prepare the documents. For this reason, make sure to let them know if there has or will be any change in your marital status.
Job Status: Don’t change jobs, become self employed, or quit your job during the process. Any one of these actions could result in a loan denial. In fact, the lender may re-verify your employment just prior to final approval even if you’ve already been approved.
Bank Accounts: Leave your money where it is until the purchase. Do not move money to another institution even if the lender has verified your funds at one or more institutions. In addition, check with your loan officer before making any large deposits. By all means, do not cosign a loan for anyone during the process.
Accounts and Bills: Pay all bills on-time and do not let accounts fall behind. Only pay off certain bills if your lender tells you to do so to qualify for the loan.
Shopping: Lenders are known to check your credit or re-verify funds at the last minute. Avoid making any large purchases. Do not use your credit cards excessively or spend money which you have set aside for closing costs. A major purchase that requires a withdrawal from your verified funds or increases your debt may affect your credit score. As a result, you may not qualify for the loan.
Buying a new home is one of the most exciting times in your life. While there may be stressful circumstances, the end result is buying a new home, moving in, and starting a new life chapter. Trust your real estate professional, take things one step at a time, and try not to worry. Download the list of questions you can refer to when talking to a mortgage lender.