The mortgage process includes a number of steps that can easily overwhelm any home buyer. The prospect of homeownership can be exciting, but as home buyers try to find their way through this uncharted territory, they don’t want to be left feeling lost and uncertain.
Luckily, there are ways for homebuyers to successfully navigate the mortgage process.
Finding a Lender
Between banks, credit unions, online lenders, and more, homebuyers have a lot of options to choose from when searching for the perfect mortgage lender. When considering a lender, buyers should review loan product availability and lending criteria, especially the credit score requirement.
For example, a buyer with a low credit score may find a conventional home loan difficult to secure, so a lender that offers a home loan product designed for people with low credit scores would be ideal. In that case, an FHA would be a viable option for a buyer. If the lender offers FHA loans or at least another type of loan product designed for someone with more than a few blemishes on their credit report, that lender would be the ideal fit.
Pre-qualification/ Pre-approval
Many lenders offer home buyers the chance to get pre-qualified or pre-approved for a home loan before they actually apply for the loan. These two steps are important because they will give the buyer a better idea of their buying power; however, pre-approval requires a more thorough look into the buyer’s finances, so these results are more accurate than what is provided when a buyer pre-qualified.
Buyers should note that although a lender may pre-qualify or pre-approve them for a specific rate and amount, this doesn’t mean the buyer has to spend this amount on a house. Buyers have a better understanding of their finances than lenders do, so calculating how much they can afford for their monthly mortgage payments would be helpful.
Finding a Home
This is the home that they will live in for the next 20 or 30 years, so home buyers should be realistic when selecting a home. What is the first impression of the home? Does it satisfy their wants and needs? Is it in the ideal location? Is there anything they would change about the house?
After finding a home, buyers can put in an offer with the seller. Getting pre-approved for a loan prior to shopping for a home will allow the buyer to come prepared and be taken more seriously by the seller.
Completing an Application
When submitting an application for a home loan, there will be several documents that will be requested from the home buyer. The goal would be for the lender to collect documents that can be used to verify the home buyer’s income, debt, and any assets they may have. It is recommended that buyers confirm which documents are needed to apply for a home loan so they can submit them along with an application as soon as they find a home and put in an offer.
Third-party Services
Just because an offer has been accepted by the seller, this doesn’t necessarily mean that this is what the buyer will pay for the home. Hiring third parties for various services can reveal things about the home that were unknown to the buyer. If there are issues with the home, buyers can make arrangements with the seller to lower the cost of the home.
For example, a home inspection, which is an examination of a home’s structure and systems, can be done on the home before closing. If the roof needs to be replaced, the buyer can request that the seller cover the cost of the repair or adjust the price of the home to account for the money the buyer will spend getting the roof replaced or repaired.
Closing
Once a buyer finds a home and is approved for a home loan, they still aren’t quite ready to get the keys to their new home. Closing is the final step to officially becoming a homeowner, and this is when all parties sign documents, the buyer pays closing costs and the seller transfers ownership of the home. Buyers may be required to present certain documents at this meeting, so inquiring about the necessary documentation can ensure closing goes smoothly.
Each step of the mortgage process is an important one. Something may seem small and unnecessary, but even the smallest of things can make a big difference when navigating the mortgage process. Some buyers find the mortgage process to be stressful and overwhelming, but it doesn’t have to be.
