You’ve decided to buy a home – great! Buying a home is exciting, but it can be a long process. The first thing you need to do is apply for a mortgage loan. In this article, you’ll learn when and how to apply for a mortgage loan, the types of mortgage loans available, terms for mortgage loans, and why it’s important to get pre-approved for a mortgage when buying a home.
📅 When to apply for a mortgage loan
You should apply for a mortgage loan as soon as you know they want to start looking for a home. Applying for a mortgage right away gives you an idea of how much house you qualify for, so you can search for a house you can afford that also doesn’t cost more than what you qualify for based on your income and expenses.
🤔 How to apply for a mortgage loan
Before applying for a mortgage, you’ll want to check a few things:
- Credit score – The better your credit is, the better your chances are of getting a low mortgage rate. You’ll want to check for discrepancies in your credit with all major credit bureaus.
- Credit standing – Balances on all credit accounts should be low or paid off before you apply for a mortgage.
- Down payment – Home buyers who can put down higher down payments have better chances of being approved for a low rate. Try to put down at least 30% of the price of the home you want to buy as a down payment. If a home costs $150,000, you’ll want to put down $45,000 as a down payment.
- Income – Lenders want to see consistent income, so don’t quit your job right before submitting a mortgage application.
- Interest rates – While mortgages aren’t approved or denied based on interest rates, they can affect the monthly payment. They can also change while the mortgage application is being reviewed and processed. If you’re afraid you might miss out on a good rate, ask your lender if you can pay an additional fee to guarantee you’ll get the rate you applied for.
- Money on hand – Not only will you want to have money for a down payment, you’ll also want to have money set aside to pay for costs to close on the home and pay for points if needed.
- Price Ranges – You’ll want to figure out how much you can afford to pay every month for a house payment.
- The Lender – Be sure to find out about each lender’s reputation and history and their reputation for approving or denying mortgages. If the lender turns down 20% of the borrowers that apply, you may not want to apply with that lender.
Once you’ve considered all these factors, gather all your financial paperwork, including W-2s, paycheck stubs, tax returns, evidence of any income you receive outside of your regular job, such as child support or alimony payments. Also, be sure to make a list of any debts you have, such as credit cards, student loans, car loans, or child support payments.
📝 Types of mortgage loans
- Adjustable rate mortgage – Adjustable rate mortgages only have a fixed rate for a specific period of time – usually 3 to 5 years. After that, it goes up based on an index and then adjusts regularly.
- Fixed rate mortgage – With fixed-rate mortgages, the percentage rate is negotiated and set, and doesn’t change during the entire life of the loan.
📃 Terms for mortgage loans
Mortgage loan terms can vary from 15 years to 30 years. People who buy smaller homes may want to try paying them off in 10 years, and those with very good credit may want to try extending their mortgages out to 40 or 50 years.
💡 The Importance of Mortgage Pre-Approval When Buying a Home
It’s important to get pre-approved for a mortgage before you start searching for a house, so you know how much you’ll be able to spend. Once you’ve been pre-approved, you can look at homes by price, find a neighborhood you like, and find your ideal house much quicker.
That’s the basic process of applying for a mortgage, and the information you need to provide. If you have the information needed before you apply for a mortgage, you’ll get through the process a lot quicker, so be sure to keep accurate records and have them available if the lender needs them. Once you’ve gotten through the process, you’ll be in a home you’ll like.
Your real estate agent is the best source of information about the local community and real estate topics. Give Zatta Real Estate Group a call today at (225) 279-4668 to learn more about local areas, discuss selling a house, or tour available homes for sale.