What You Need to Get a Mortgage
Getting a mortgage is one of the essential logistical steps in buying a home. Your mortgage is something you'll likely spend decades paying off, so make the right decision at the outset. While shopping for a mortgage can be a long and frustrating task, you can streamline the process by knowing in advance what you need to qualify.
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Income
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One of the most important things you'll need to get a mortgage is a steady source of income. Lenders must have reason to believe that you'll be able to pay your loan back, with interest. Besides an income that's high enough, you also need some form of job security in the form of a steady employment history or a job in a stable industry. Pay stubs and copies of tax returns can supply proof of income for your lender to see that you represent a reasonable risk.
Savings
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Mortgage lenders require borrowers to make down payments. A typical down payment is 20 percent of the value of the home, which can amount to tens of thousands of dollars. While some lenders offer mortgages that include a second loan to cover the down payment, these so-called piggyback mortgages are risky for borrowers and lenders alike. Saving for a down payment is one reason home buyers wait before applying for a mortgage. If you can make a larger down payment, you'll have more equity in your home and you'll also pay less in interest since you have a lower principal balance.
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Patience
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Rushing through the mortgage process can lead to a decision you'll have plenty of time to regret. Patience allows you to compare mortgage offers, not only in terms of their interest rates but also terms, prepayment penalties, fees and rate adjustments. Mortgage rates also change over time along with economic trends. You can get a better deal if you save more money for a down payment or improve your credit score to get access to lenders' lowest interest rates. Approaching the mortgage process without a deadline gives you the best chance of coming out with a loan you can afford comfortably.
What You Don't Need
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When you first apply for a mortgage there are certain things you won't necessarily need that shouldn't prevent you from moving forward with the process. One thing you don't need is a property in mind. While some home buyers wait until they find a home to apply for a mortgage, others get pre-approved. Mortgage pre-approval doesn't represent a commitment but does indicate how large a mortgage you qualify for. It also lets sellers know that you're ready to buy, which can help in negotiations. You also don't need an existing home to sell, assuming that you have adequate savings to make a down payment. Finally, you don't need an attorney, unless you suspect a scam. Mortgage lenders, brokers and real estate agents can help you navigate the mortgage process.
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