How to get a mortgage: a step-by-step guide for home buyers



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If you want to buy a house but don’t have a ton of cash, you need to learn how to get mortgage– this essential mortgage, used to buy real estate, which you will then repay for many years or even decades.

The vast majority of home buyers need a mortgage to fulfill their dream of home ownership, but that doesn’t mean lenders are just handing out loans to anyone who asks. There is a process that you must follow. Therefore, before you even step into a home, make sure you know how to get a mortgage so that you can get a loan without any problems.

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Step 1. Buy a mortgage

Before you start buying houses, you should mortgage store… Many newbie buyers wait until they find the perfect home to start shopping for a mortgage and look at mortgage rates – and that’s a mistake.

Reason: all lenders are slightly different, so it is worth comparing the loans they offer in terms of interest rates, closing costsand more, ”says Richard Redmond, mortgage broker and author of Mortgages: The Insider’s Guide.

This is a good time to decide if you want to apply for a fixed or adjustable rate mortgage.

This step will also help you identify any problems lenders may have with your loan application and give you time to correct those deficiencies so that you are in great shape to make an offer as soon as your dream home comes along.

You will also want to check your credit report before moving on. If your credit rating is below excellent, or even if you have bad credit, you have work to do before you can qualify for a loan with a favorable interest rate. There are steps you can take (such as repaying your loan amounts and possibly increasing your credit card limits) to quickly improve your credit score. However, if your credit report shows more problems, you may have to spend several months to a year working on your credit rating before you try to get a mortgage again.

Step 2. Get a pre-approved mortgage

The purpose of meeting with the mortgage lender is to get pre-approval for the mortgage. During this process, the lender will research your financial background and check your income, debts, and other factors that will help him determine whether to give you a home loan or not and how much home you can afford to buy.

Prior approval is critical if you want your home buying efforts to succeed. Why? Because the pre-approval letter from the lender shows home sellers that you have the financial support you need to buy their home. Without it, sellers have no guarantee that you can afford their place, and in many cases they won’t take you seriously.

Don’t confuse pre-approval with pre-qualification. To prequalify, the borrower usually talks to the lender about finances, but the borrower does not need to provide any paperwork.

“Prequalification can be done on a loose-leaf sheet of paper,” says Ray Rodriguez, regional mortgage sales manager at TD Bank. “Often it has no value.”

To apply for pre-approval, you need to provide the lender with the following:

  • Pay slips from the last 30 days showing your annual and monthly income or business profit or loss if you are self-employed
  • Two years of federal tax returns
  • Two years of a W-2 form from your employer
  • A 60-day or quarterly report for all of your asset accounts, which includes your checking and savings accounts, as well as any investment accounts such as CD, IRA, and other stocks or bonds
  • Any other current ownership of real estate
  • Residential history for the past two years, including landlord contact information if you rented
  • Proof of funds for the down payment, such as a bank statement (if the down payment money is a gift from your parents, “you need to provide a letter that clearly states that the money is a gift, not a loan,” the message says Rodriguez: Otherwise, your down payment will affect your debt-to-income ratio and may prevent you from getting a mortgage.)
  • Mortgage application
  • Authorization to review your credit report and obtain your credit score (Your credit history shows your history of making mortgage and credit card payments and borrowing other money and repaying it responsibly. Your report also shows open debt accounts you may have , including student loans, credit cards, and other debts.Even if you have a good credit rating, if you have too much debt, your debt-to-income ratio may be too high to qualify for monthly payments on a new loan.)

Step 3. Get an estimate at home

After you have made an offer for a home and signed a purchase agreement, most lenders will want to check what you are buying with your loans and evaluate it for yourself using a home appraisal. This means that the home appraiser will appreciate market value houses in comparable houses, or compsmuch like you and your real estate agent when figuring out how much to offer the house.

In most cases, the price of an appraiser will be about the same as your own – in which case everything will be fine, ”says Rick Phillips, an appraiser and real estate agent based in Vienna, Virginia. And if the score is higher than what you pay, you get a good deal. For example, if you pay $ 700,000 for a house and the appraiser says it is worth $ 710,000, you instantly get $ 10,000 in equity

However, if the loan score is lower than what you agreed to pay for the house, it can be a problem because lenders will only loan you the amount that is listed in the estimate, or up to a certain percentage of the estimate. … This means that you will have to pay the difference between the maximum loan amount and the purchase price plus closing costs – or persuade the seller to lower the selling price to what the lender thinks is fair. Another option is to challenge the credit score by filing an appeal or ordering a second credit score. Most of the time, this all works, and if not, keep in mind that your lender is essentially keeping you from overpaying for failure.

Step 4. Delete the title of the property and close the transaction.

When you buy a house, you “take the title»Property, that is, you become the rightful owner. And your lender needs proof! As such, it will request a title search, which involves paying the title company to search the public records of any heirs who insist that the property belongs to them for the lien (from contractors who worked on the house but never received payment ) or other problems. Hopefully all goes well, but if not, this extra step could save you from a seriously daunting situation where you are fighting for ownership or are yourself responsible for returning old collateral.

Once the title is cleared, you can close the trade. This is where the buyer, seller, lender’s representative and any other participants in this process meet to sign all the documents, transfer all the money owed, hand over the keys and get on with your life!

Sure, the entire mortgage process can seem time-consuming and complicated, but rest assured, its purpose is to protect all parties, including you, from costly mistakes.

* Content originally published REALTOR.comprovided by PAAR **

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