Buying a home is one is the biggest steps a person can take financially. It truly is one of the most important purchases that someone, or a couple, can make. While we’d wish it was all about finding the house with the most curb appeal, the reality is that the stress caused by purchasing a home is manifested in finances. So, how do you set yourself up for financial success? Qualify yourself. What does that mean? Know the loan lending process and where you stand personally amongst it.
First things first. A mortgage. It’s more than a French word with silent consonants that’s weird to pronounce. Mortgage loans structure your entire spending budget. It’s the first thing any homebuyer should do before even searching for a house. In order to get a mortgage, you have to provide two vital pieces of information through a third party, respected institution. Your credit history and credit score. This overall score is what makes you eligible for a loan. This leads to a pre-approval.
Now, don’t get this confused with a pre-qualification. A pre-qualification is simply a financial history you provide for a loan officer. A pre-approval is a document from a lender that shows you qualify for a specific mortgage because you have demonstrated your ability with actual data. Those third-party people we mentioned earlier come into play. They have an important role in lending! Approvals carry more weight; many real estate agents nowadays will even ask if you have a lender pre-approval. (Not sure about other financial or legal processes? Ask a REALTOR! Real estate agents are great resources for more than just house hunting.)
Once you have pre-approval you can apply for a mortgage loan. There are multiple forms of mortgages—government-backed, fixed-rate loans, FHA loans, and VA loans are just a few to name. Each loan is different and may not work for everyone. Do your research and talk to people. Asking family and friends is a good place to start, but a REALTOR is a key person. They deal with this type of transaction daily. Another tip? Speak to at least three different lenders. That may seem like a lot of work at the moment, but it will help you in the long run. We guarantee it.
After you find the best loan for you, it’s time for a mortgage loan application. Items that a loan officer will need for an application generally include proof of employment, income, debt, and any available assets. More specific loans may require additional information, however, these are typical things you could expect to need. These documents lead to a loan estimate. A loan estimate is the overall run-down of the mortgage. It predicts the costs associated with the loan. It also includes important information like pre-payment penalties. Legally, you will receive it within three days of your application.
The application must then be sent to be approved or denied, which is called closing. Expect a lot of paperwork at this point. The Closing Disclosure confirms all of the costs (basically it validates the loan estimate; sometimes the numbers can be different. Remember an estimate never means anything is set in stone! Another important note, you have three days to review the Closing Disclosure! Use this to your advantage if you must.
The Closing Disclosure also coincides with the actual purchasing part of home buying. If you haven’t found a house, yet, no worries! You’ll just stay within the pre-approved phase of this process. (If your loan is approved, congratulations! It’s time to get the moving truck!)
Once you are pre-approved for a loan, you can configure your budget and be on your way as not only a first-time buyer but a serious one! You have a budget and now you’re ready to see what houses are the best fit for you! The rest of the mortgage process depends on the house or property you decide to purchase. Don’t let that overwhelm you. Again, always ask questions and do your homework! If you’re looking for a REALTOR to help you through this process or have any further questions, feel free to reach out to us at the BSW Group.