Buying a home is very exciting and stressful at the same time. Lessening stress is all about learning as much as you can before you buy.
How to Get a Mortgage, From Start to Finish
The process of getting a mortgage can often be hard to understand. Most people who buy a home care more about getting their dream home than about their lender. When you add in all the forms and requests for documents, the mortgage process can quickly become a pain. Here's a rundown of how it works, which should help you feel less stressed.
The first step is to look for the best loan. Your situation is the only thing that can tell you which loan is best for you. One person's key may be a low interest rate, while another's may be a low down payment. Your credit score, the length of the loan, and other things are also important. I really think you shouldn't apply at the bank where you already have a checking account. If they know that this is your first loan, they will give you a bad deal. Shop around or get help from a mortgage broker.
Not all loans require you to get pre-approved, but you should. This one step will make buying a home at least half as stressful. You don't have to worry about your loan application during escrow because it has already been approved. This extra time gives you a chance to bug the seller for discounts on the house you want to buy.
The next step is to apply for a mortgage. People often make the mistake of giving as little information as possible. Don't. If you have bad credit or something else bad, the lender will find out about it. On your application, give as much information as you can.
Documents that back up your application are a part of it. A mortgage broker can really help in this situation. Your application won't be taken at face value by a lender. Unlike when you apply for a credit card, the lender will want to see proof. You will often be asked to send in tax returns, pay stubs, bank account statements, investment account statements, and so on. Some of these will get lost, and the lender will have to ask for them again. Welcome to the process of getting a home loan!
The next step will be to order appraisals, inspections, and title searches for the property. The lender wants to know that the seller has the right to sell the house, that the house is in good shape, and that its value is high enough to cover the loan. During this step, you can't do much, so just chill out.
At this point, the loan is processed to get everything ready for the underwriter to look over. The lender's "buck stops here" with the underwriter. The loan will be approved or turned down by the underwriter. They might also ask for more details or offer different terms. You can make counter offers if this happens.
If the loan is approved, the next step is to make a promise. You will, in fact, sign the loan papers. This sounds easy, but when people think about having to pay back hundreds of thousands of dollars, they can't help but feel nervous. Just do it!
Assuming that the purchase goes well, the next step is closing. The lender will send money to the title company, escrow will close, and you'll have a new home and tens of thousands of dollars in debt.
