Mortgage financing can be a big step, but it’s not always straightforward. This process involves plenty of paperwork and requires significant upfront financial preparation. That’s why it’s essential to comprehend all the steps involved in getting a mortgage loan before you start looking for your dream house.
1. Get Preapproved for a Mortgage
The initial step in getting a mortgage is getting preapproved, which will let you know how much you can afford to spend on a home. Doing this helps avoid overspending and keeps your budget in check while searching for your new property.
2. Select Your Mortgage Type
Once you’ve identified your ideal lender, the next step in getting a mortgage is selecting one. With so many different lenders out there, do your research to find one that meets your requirements. Speak with friends and family about their experiences as well as check rating sites and other online resources for opinions about each lender.
3. Consider a Down Payment
A down payment is an amount you contribute toward the purchase price of your home that can range from as little as 3% of its value up to 20%. This reduces your loan-to-value ratio, making the mortgage more accessible both for you and your lender.
4. Apply for a Mortgage
Once you’ve identified the perfect lender, it’s time to apply for your mortgage. This involves filling out an application form, providing income and asset documentation, as well as passing a credit check.
5. Prepare for an Interview with a Lender
After applying for your mortgage, the lender will contact you to review the application and answer any queries. The interview provides the opportunity for you to share information about your credit history, employment status and assets; plus it helps them assess whether there’s sufficient funding available from their side of the table. This interview helps them decide if their loan program works well for you.
6. Submit Your Mortgage Application and Receive Approval
After your mortgage application is approved, you can move forward with purchasing a home. To do this, you’ll need to submit various documents such as tax returns, pay stubs and bank statements to the lender.
7. Be Accurate with Your Information
It is essential to be truthful when filling out your mortgage application. Additionally, include notes and explanations for anything that may appear odd on your credit report or statement, such as a late bill payment. This helps ensure all information provided is accurate and up-to-date.
8. Gain Knowledge About Mortgage Underwriting
A mortgage underwriter is the person responsible for reviewing your application and deciding if you qualify for a loan. They’ll conduct an investigation into your finances and credit history, which may take several days or weeks depending on how many documents are needed.
9. Arrange for Appraisal and Closing
The last step in the mortgage process is an appraisal. Your lender will pay an independent appraiser to conduct a detailed inspection of the home you’re purchasing, which helps them decide if it’s worth borrowing the money you have borrowed. With this appraisal in hand, they can then decide if there are any hidden costs that need to be addressed.
