Mortgages: Where Do I Start?
The mortgage process is easy as long as you know what to expect and you plan ahead. First-time buyers are often confused about the process. While a real estate agent can guide clients through the steps involved in buying a home, personal knowledge can prove beneficial when getting a mortgage loan.
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Clean Up Credit History
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Shortly after making the decision to purchase a home and acquire a mortgage loan, go online and visit Annualcreditreport.com and MyFico.com. These online sources can provide you with your credit report, which is free, and your credit score, for which you must pay a fee. Knowing where you stand credit-wise helps prepare you for the mortgage loan process. Lenders will check your credit first, and based on your history, either approve or rejection your application. A credit score of 680 or above helps you qualify, as does a history of timely payments and low debts.
Cash for a Down Payment
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Some home buyers don't plan for a down payment because they think a lender will approve them for 100 percent financing. Veterans Administration home loans do not require down payments. However, other mortgage loans, such as Federal Housing Administration and conventional mortgages, do require a down payment from buyers of at least 5 percent. The amount you need out of pocket for a down payment depends on how much you spend on a house. For example, a $200,000 property may require a down payment of $10,000, based on a 5 percent down payment.
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Gathering Paperwork
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Lenders request a large amount of paperwork when reviewing home loan applications. The sooner you supply the needed documentation, the sooner you can get approved and move into your home. To qualify for a mortgage, you generally must have 24 months of verifiable consecutive employment. A lender may require tax returns, W-2 statements or your most recent paycheck stubs. Self-employed home buyers will need to forward tax returns from the past two years. Lenders may also need banking and retirement information.
Shopping Around
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Shopping around and meeting with more than one lender helps you get the best mortgage loan possible. No-obligation mortgage quotes present the opportunity to make side by side comparisons. You can compare the interest rate on the home loans, monthly payment, down payment requirement and estimated closing costs. Viewing all your options helps you choose the best mortgage loan for your situation. Consult a mortgage broker for easy comparisons. Brokers can explain your different options and help you make an informed decision.
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