Depending on where you live, the average cost of a home may be several hundred thousand dollars or more. Many people share the common dream of owning their own home, but it can be impossible for many to pay the full cost of a house outright. A home mortgage provides you with a more convenient way to buy a home because it enables you to stretch out the purchase over monthly payments for several decades. If you have never applied for a mortgage, you may be wondering what you need to do to get started with the process.
Determining What Loan Amount is Right for You
One of the most important steps you need to take to prepare for the mortgage application process is to determine what loan amount you need and what loan amount you can afford. You can easily use a loan calculator online to estimate the maximum loan amount you can qualify for and what funds you may need for a down payment and closing costs. However, you also need to take the additional step of reviewing these figures with your personal budget. Just because you can qualify for a specific loan amount does not mean that the payment or closing costs will be affordable for you.
Selecting the Right Type of Mortgage
This step is often done in conjunction with determining the right type of mortgage to apply for. A 30-year fixed rate loan is most common. This will provide you with the longest term possible as well as even monthly payments throughout the life of the loan. However, if you plan to retire soon, a shorter term length may help you to pay off your house more quickly. On the other hand, if you plan to relocate in a few years, an adjustable rate loan may yield a lower interest rate.
Finding a Reputable Lender
After you have thoroughly compared the loan options and determined which loan amount and loan type you want to apply for, you are ready to shop for a lender. You can begin by comparing rates and terms. However, when you are getting firm loan quotes, you also want to pay attention to which lenders are most responsive to your calls and emails as well as which ones are more knowledgeable and helpful.
Walking Through the Loan Process
When you decide which lender you want to work with, your lender will guide you through the loan process. It usually begins with you submitting a loan application and agreeing to have your credit report reviewed. If all appears acceptable to the lender, the full loan process will begin. You will be asked to submit tax returns, pay stubs, bank statements and other documents. In addition, an appraisal and property inspection may be ordered, and a title report may be requested.
The entire loan process often takes approximately four to six weeks, but there is variation in this. Your lender can provide you with more detailed information about their specific loan process before you complete the loan application.