Understanding Home Loans
The topic of home loans can be confusing for both seasoned and first-time home buyers. Here are some tips to make the process as clear and straightforward as it could be.
When to Begin
The first step to begin the home loan process is to get pre-qualified before you start to look at homes. Prequalifying with your lender is a good way to determine how much house you can comfortably afford. Pre-qualified buyers can shop confidently knowing key elements of the mortgage loan have already been reviewed. They will also be seen as a more serious buyer when it comes time to write an offer on a home.
How Much Do You Qualify For?
While a loan officer will be able to give you the most accurate information, you can use online calculators or take three to four times your gross annual income to give you a ballpark figure of what you’d qualify for.
When shopping for a lender, you should compare interest rates and closing costs. Interest rates change daily as the stock market changes. So, if you’re comparing different lenders, they should be compared on the same day for an accurate comparison.
Types of Mortgages
Mortgages are not one-size-fits-all. You can find one with a lower down payment, cheaper monthly payments, fixed rates, or adjustable rates. Talk with your loan officer to determine what’s best for you.
What is Qualifiable Income?
To a bank, not all income is qualifying income even if it’s stable to you. For example, if you’re self-employed, you may need to have one to two years of tax returns reviewed to determine your average income. Talk with your loan officer to determine how your income would qualify.
Complete the Loan Process
Once you have an accepted offer, the loan process can be completed in four simple steps:
- Send the bank your supporting loan documentation. That might include paystubs, bank statements, W2’s, etc.
- Sign the documents that the lender sends.
- Secure homeowners insurance for your new home.
- Attend the closing, which is the day that you will receive the keys in exchange for the down payment money. This closing usually takes about half an hour.
Now You Know the Basics
Now that you know the basics, the next step is to schedule an interview with your local loan officer and see for yourself how simple the process can be.
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