Understanding the loan process will put your mind at ease as you start down the road to homeownership.
Buying a home can feel overwhelming, and a lot of that uneasiness can come from not understanding how to get a mortgage. This guide — which includes 20 questions to ask lenders — should help clarify the mortgage process and get you on the road to homeownership.
Before you start working with a real estate agent, it’s important to understand how much home you can afford. This will help you and your agent target your search, and you’ll avoid the heartache of falling in love with a property that’s out of your reach.
You can determine affordability in seconds using two different mortgage calculators. First use an affordability calculator to determine a purchase price appropriate for your income and down payment; then use a payment calculatorto determine your exact monthly obligations.
Next, you’ll actually connect with a lender to apply for a loan, and the lender will review all of your qualifying documentation. A loan officer will ask you to provide the items below — verbally or in an online form first, then with full documentation:
Once your lender has your full profile, he or she can recommend loan structures based on your situation.
Perhaps your income is strong, but you’re early in your career and haven’t saved up that much money. In this case, your lender might recommend a 10-percent down payment because the slightly higher payments fit your budget and enable you to conserve cash.
Or you might start the process thinking you want to buy a 1-bedroom condo using a 5-year adjustable-rate mortgage because you think you’re going to sell the home and upgrade within five years. But your lender may look at your income and consider that you want to start a family within three years, then determine that you can afford the monthly budget and cash to close on a 3-bedroom single family home using a 30-year fixed loan.
It’s important to match your loan terms and home buying choices with your objectives. Because lenders require your full financial profile, they are in a good position to help you explore and fine-tune your objectives to make sure you select the loan type that fits you best.
After you’ve begun the mortgage process, you’re ready to find a local real estate agent and begin your home search.
Introduce your lender to your agent, and ask your lender to brief your agent on your mortgage process. This will verify your target home price and down payment for your agent and show that you’re ready to close as soon as you find a home.
Once you find a home you love, you’ll write an offer. Your agent will present your offer to the seller, and if the seller accepts your offer, your loan process will move to the final approval phase.
Your lender will inform you that it’s time to lock your rate. A rate lock runs with a borrower and a property, so you can’t lock your rate until a seller has accepted your offer.
Then your lender will request any updated documentation needed from you, order an appraisal on the property and review the property title report.
Once all of these items check out, your lender will draw final loan documents with your desired rate and terms for you to sign. Your lender will fund the loan, and the home will be yours!
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