Buying a new home is a major commitment. If you are considering a mortgage loan to finance your new home, you need to be aware of how it works and what you can expect throughout the process. Here’s a basic guide to help you navigate the mortgage process while buying a new home.
Prequalification Vs. Pre-approval
Prequalification is a valuable step in the home-buying process. Getting prequalified is relatively quick and easy, depending on the type of prequalification you choose. You can also opt for prequalification that does not affect your credit report. To get prequalified, you’ll need to provide some basic financial information related to your debt, income, and assets.
Pre-approval shows sellers that you are serious about purchasing the house, and it can put you a step ahead of your competitors. The housing market is extremely competitive, so you can never be overprepared while buying a house. Pre-approval speeds up the process after you have found your dream home.
Pre-approval speeds up the entire process of buying a home, but unlike prequalification, it requires extra paperwork. Some of the documents you may be asked for during pre-approval include W-2s, pay stubs, bank statements, and tax returns. The lender also checks your credit score and history and uses the information to determine your loan amount, which helps limit your search to homes within your price range.
Here are the steps that a buyer must go through during the house-buying and mortgage process.
Submit an application
The first step is to apply for a loan. Your moneylender or financial institution will require you to submit a few documents before accepting your application. These include:
- Your ID and Social Security number
- Pay stubs from the last 30 days
- W-2s or I-9s from the past two years
- Proof of additional sources of income
- Federal tax returns
- Recent bank statements
- Details on long term debts
- Information related to existing real estate property (if any)
Be patient with the process
Once you submit your application, the lender begins to work on it. There will be an appraisal to confirm the home’s value and a title search to ensure there are no outstanding liens on the property. These steps are meant to protect the buyer and lender and ensure a legitimate transaction.
Keep your debt in check
Do not make the mistake of applying for new loans or acquiring new debts while your application is still under review. The reason for this is that anything that affects your debt-to-income ratio (DTR) may impact your mortgage approval.
Prepare for closing
Before closing, you’ll receive a document titled ‘Closing Disclosure’ (CD) from your lender listing all the terms of the agreement and your final costs. Do not rush through the closing document. Instead, take your time to review and ask questions if you need to. Now is the time to make arrangements for your down payment and closing costs.
Bring it to a close
To seal the deal, you will meet with the closing agent so that you can sign all the mortgage documents. Don’t be in a rush to sign, but take your time to read through all of the papers, and don’t be afraid to ask questions. Do not go empty-handed to your closing; take all the necessary documents such as a cashier’s check, photo ID, and proof of homeowners insurance.
This is what you need to know about the home-buying and mortgage process. Contact us at Andraya Coulter for any assistance regarding financing your mortgage once you’ve identified your next home.