How Do I Get a Mortgage?
When buying a home, you’ll want to make sure you’re eligible for and can afford a mortgage, as it’s what will let you purchase and afford your home. To start, you’ll want a reputable and trustworthy mortgage lender, from a bank or other loan/financial institution.
In modern days, the search for anything starts online, and mortgages are no different. You can search best mortgage lender in Google and find numerous lenders near you. Taking the time to look into each lender, learning about them and reading reviews can help you find the best lender for you.
You can talk to friends and family, or anyone you know who has experience as well. However, be sure to look into them and their policies further. Each person’s situation is different, and you’ll want to be sure you find the right match for you and your needs.
If you work with a realtor, most will have connections or recommendations for you, helping to pair you with a good match for you.
When doing any research, whether you’re online or directly contacting any banks or mortgage lenders, some good questions to ask or hunt answers for include:
- What types of mortgages do you offer?
- How long does the approval process take?
- Where do your process and approve your loans?
- What costs come with your mortgages?
What Documentation Do I Need to Get a Mortgage?
While each case is different, you’ll find common forms of required documentation to include:
- Government Issued I.D
- Social Security Card
- Proof of Employment
- Pay Stubs
- Proof of Income/Employment
- Credit Reports
- Bank statements
- Asset statements
What is the difference between Pre-Qualification and Pre-Approval?
An important thing to consider is the difference between pre-qualification and pre-approval.
A pre-qualification is not formal and serves as an estimate of whether you’d be approved and for how much. This is an early step and gives you an idea of if you’re able to get the mortgage you’re looking for, and if not the plan you can get.
A mortgage pre-approval is what you want, and will go a long way in making the buying process easy. Mortgage lenders will generally give you a pre-approval that may last for a few weeks or months (giving you time to search for a home) so that when you finally find a home you want to buy, it’s easy to push the process through.
If a seller sees you have a pre-approval, they’re more likely to accept your bid, as they know you can get the appropriate mortgage, you can afford the purchase, and the process can be done quicker than if you didn’t have a pre-approval already.
Which Type of Mortgage Should I Choose?
When it comes to mortgages, you’ll find a variety of different types available, each offering different ways to get the money you need to buy your home. FHA, Federal Housing Administration, mortgages are the most common available, and make it possible to put a small downpayment (as little as 3.5%), along with a seller concession which provides as much as 6% of the purchase price of your home that helps you pay for closing costs and other items you may need for your home.
FHA mortgages are great for those who need a more lenient plan, helping those with lower credit scores get approved for a mortgage.
With stricter rules and more difficult rules for approval, conventional mortgages are an excellent option for those with great credit, money saved and regular income coming in. It looks good to sellers, allows you to decline mortgage insurance (an extra expense that is required for FHA mortgages), and gives you more control over what your mortgage will look like.
VA Mortgages, also known as Veteran Administration loans, are specific loans for veterans that that help them by allowing them the option of financing 100% of the home’s value. VA loans can also offer seller concessions, an additional benefit for Veteran’s looking to buy a house.
Are there Mortgages Designed for First Time Home Buyers?
As a first time home buyer, it can be difficult and stressful to figure everything out and find the best options for you. Luckily, there are several programs or mortgage options available specially designed for first-time buyers to help make it as easy and stress-free as possible.
That’s why finding an experienced and trusted realtor or mortgage provider would help make the process as comfortable as possible. The First Home Club is an example of a program that helps first time home buyers, requiring them to save about $1,900 over ten months, which then makes them eligible for a $7,500 grant to spend towards closing costs. There are other criteria needed to be eligible as well, but it’s an example of the type of systems available to first-time buyers if you look.
It would be wise to consider how a grant or first time home buyer program will look with sellers, as they may not understand it or think less of it as compared to buyers using a regular mortgage and putting down about 20%.
Will My Interest Rate Change?
Your interest rate may change, but it’s only based on the type of mortgage you choose. Adjustable Rate Mortgages, ARMs, will commonly have a pre-determined period in which the rate is fixed, but after it may fluctuate based on several factors. The potential benefit is that the rate could go down, but the downside is that it may go up as well. Most buyers would rather have one set rate that never changes, so they know their payments and the overall cost won’t ever change. Choosing what type of mortgage will ensure you never have to worry about the mortgage rate changing.
What is a Mortgage Point?
A mortgage point is an optional feature for mortgages in which you pay to lower your interest rate. A mortgage point is commonly 1% of the cost of your mortgage. Each mortgage point generally reduces your rate by about 0.25%, which may not seem like much at first, but when spending potentially hundreds of thousands of dollars (or over a million) over the course of 30 years, it can make a huge difference.
Like with everything else in the mortgage process, it’s up to each person to decide whether it’s a good option for them, and what works best for their particular situation.
How Much Should I Save To Buy A Home?
The critical thing to remember when buying a home with a mortgage is you’re not paying for it outright; and depending on your plan, you may only pay up to 20% upfront. To start, you’ll want to have about $20% of the cost of the home you’re looking for saved up, but also enough for potential closing costs afterwards. You’ll also want to consider whether you need to buy furniture, if you’re renovating anything in the home, and thinking about what your monthly cost will be.
However, that’s not all. Other costs to consider include:
- Mortgage Processing Fee
- Real Estate Attorney Fee
- Underwriting Fee
- Bank Attorney Fee
- Home Inspections
You can speak to many mortgage consultants or go online to find mortgage calculators that will help you get a better idea of the exact costs and money you’ll want to save up for your home.
How Long Does it Take To Get a Mortgage?
There’s no exact amount of time it will take to get a mortgage, as each mortgage provider and situation varies. When researching a mortgage provider, look into how fast the close on average, looking for anywhere between 30 and 45 days for a good mortgage provider.
When going through the process, be sure to keep the lines of communication open, keeping an eye on how it’s going and if anything is delaying or holding up the process. On your end, be sure to send them any documentation they need ASAP, making sure any delays aren’t on your end.
What is a Bank Appraisal?
When you’re buying a home, a crucial step to the mortgage process is the bank appraisal, which tells the mortgage provider how much the house is worth based on the opinion and structure of a trusted source. The appraiser will look at many factors, including how much similar properties, in similar areas, sold for recently, square footage, the overall condition of the home and more.
The appraisal process is vital and can impact whether the sale will happen at all. It’s important to keep in mind all the various steps that go into buying a home and be patient. As exciting as it is, it’s also likely the most substantial purchase/investment you’ll make, and you’ll want to make sure it goes well.