As a first time home buyer, you want to make sure to get the best loan possible. There are many loans to choose from such as home ready loan, FHA loan, Conventional or a VA loan. Each one has a different borrowing requirement including the percentage of down payment, minimum credit score needed, and interest rates. The one fit for you should be decided after thorough research and understanding that this is financially realistic for you every month.
You may need a good mortgage broker like Blutin Finance to help you and in this guide, we will guide you through how to take out a mortgage.
First, you want to make sure you can afford to produce a down payment. There are rules in place regarding the down payments such as how or when it is obtained. Whether it’s enough for a certain mortgage is to be determined by the lender. Some loans don’t require a large down payment or one at all, but it’s good to have it as it can help provide a lower monthly payment. This also gives you extra options on your repayment plan. Some lenders and loan types require up to twenty per cent of the buying price of the house, which can ensure there will be no added costs.
Moving onto the next step, you will need to check your credit score. This is where you want to make sure that you have taken care of any discrepancies in your credit report. It’s also a good idea to make sure that you have paid off personal credit loans or credit cards, everything that you have intended to before applying. Your credit score impacts a lot of things through the rest of this process, so making sure it is correct can be the difference of being approved or denied. This tells the lender if you are likely to pay and if it’s a risk to lend to you, determining the interest rate.
Here you move on to the pre-approval, which is a part of any loan or mortgage. The lender needs to see your financial background to determine if you should go any further in the process. This part can give you an idea of what your monthly payment can be. It can help you pick houses within your budget price. It requires you to show a lot of paperwork about assets and debt, but it’s worth it as it means you are closer to being deemed creditable to pay your loan back promptly.
You can now submit your full application along with all of the paperwork that you put together earlier. Make sure you have proof of income in the form of pay stubs, proof of assets, liabilities, and list of any credit lines or debts. At this point, it’s a good idea to get in touch with homeowners insurance and get that information to your lender. Make sure to be responsive through this process so you don’t hold it up with a lack of communication. The mortgage lender will have the appraisal done after you choose a home and are in the process of getting the loan, to make sure the house is within a price range for you while doing a title check to ensure everything is correct and the property is free of liens. You shouldn’t take out any new lines of credit as this can cause a fluctuation of your credit score. You can be put into a considerate approval, which is different from a pre-approval, with needing more paperwork on any or all information that can affect this mortgage.
Now it’s time to get your rate locked in before the closing and ensure that you understand all closing fees to include them in your down payment, which will need to be done as a wire transfer or cashiers check. Read through all paperwork with full understanding and get all of your questions answered. You are going into a contract that lasts years, so you want to have all clarification. Make sure that when you have full approval, you understand monthly payments, interest rates, penalties for paying off the mortgage early and any other information that could be relevant. This now is the part where you are a proud homeowner who has successfully applied and been approved for a home mortgage.
