New to Homebuying? Here’s our guide to getting a mortgage.
We all have to start somewhere, and honestly, it’s hard to know where. You may be anxious to buy a home, and maybe you already found the perfect spot, but getting a mortgage seems terribly scary. Other than college loans, this is a generally going to be the largest chunk of money you have ever borrowed in your life. Looking into it is a great place to start.
1. Check your credit, get your credit in check.
It’s super easy to check your credit, just google it. You may even have a bank account or credit card that you can check your credit though. It’s a good time to pay off any outstanding debts and to be sure you are paying all your bills in time. This should start at a minimum of 6 months before you want to buy a home unless you suspect your credit to be in tip-top shape already.
2. Get Pre-approved for a Mortgage
There are numerous ways to do this. Head to the local bank. Ask your REALTOR about a mortgage broker they recommend. Heck, you can even do it online. There are different benefits no matter which way you choose to go about it. Now, be prepared to have all your docs in order. Tax returns, pay stubs, bank statements. Get it ready, you may not need it all for the preapproval process, but eventually, you will.
3. Choose the Right Mortgage
The right mortgage? Huh? If that is what you are thinking, you wouldn’t be alone. FHA? Conventional? Rural Development? What does any of this mean, well, you are going to do some homework, and make sure you have chosen someone knowledgeable to help get obtain your mortgage. There are different mortgages for different types of properties, different types of buyers, and different areas.
4. Find the Right Lender
This whole process may be reminiscent of the journey to find the perfect partner. Online applications, browsing potentials, seeing if you match up right. It’s can be a bit tiresome, but it’s getting you that much closer to your home. However, it’s very important that you choose the right lender. Compare a few lenders, check rates and fees, and also check their mortgage rates.
5. Submit your Application
Things you should have ready for your application:
- W2’s for two years
- Paystubs for 30 days
- Federal Returns 2 years
- Other Proofs of Income
- Recent Bank Statements
- Details on Long-term debt (student loans, car loans, etc.)
- ID & Social Security Card
(If you already submitted this with your preapproval you may be all set.)
6. Begin the Underwriting Process
I know. It seems like it will never end this whole, getting a mortgage thing. It will, and in the end, I hope you get a home along with the mortgage! This is where the lender makes sure you qualify for the loan given their standards. What does that mean? Well, they are going to check your debt to income ratio. They are going to look into your credit history. They are going to look at your current debt. Now, if they think that you will be able to, as well as have a history of keeping up with the payments given all of that information, they will likely approve you for the loan.
7. Prepare for Closing Costs
So closing costs come out of your pocket in addition to your down payment, so keep that in mind. (Sometimes buyers will ask that sellers cover all or a portion of their closing costs in the contract. If you haven’t put a contract on a home yet, be sure to ask your real estate agent when that is a good idea. The market may be competitive, if so, it may not be the best idea.) Closing cost vary, and your closing attorney may be able to give you an estimate. Closing costs average around 2% of the sale price of the home but might go up to as much as 5%.
8. CLOSEEEEE! Yes, close on your long-awaited home.
WOO HOO. Congratulations. You made it. Time to head to your lawyers office and sign some paperwork. Then, it’s all done.
This post may simplify the process a little bit, so if you have questions, contact a mortgage broker or lender. They will be able to answer all your questions, and maybe even kick start the process! Best of luck getting a mortgage!