Step by Step guide on everything you need to know before applying for a mortgage loan. These quick tips will make sure you have a hassle free experience
Applying for a mortgage is definitely something that intimidates people.
Can you relate?
If you're nervous about beginning the loan process but need to start so you can buy a house, you're not alone.
One of the reasons people feel intimidated by this is because they don't understand the steps in the process or the factors that matter to lenders when they evaluate a person's mortgage application.
If you need a mortgage and want to learn what to expect, check out these 8 tips about mortgage loans.
- The Lender Will Check Your Credit
Mortgage lenders check credit, and a person's credit can disqualify them from getting approved for a loan or can limit them to a certain loan program.
It might be a good idea to check your credit before applying just to make sure you know what's on your report.
- Your Debt-to-Income Ratio Is Extremely Important
Your credit score is highly important to lenders but your debt-to-income (DTI) ratio is almost just as important.
This ratio compares your income to your debts and reveals to a lender if you're in good financial shape or not. It also helps lenders determine how much money to offer a person for a mortgage loan.
Gather up your pay stubs and debt statements before applying because you'll have to submit these types of documents so the lender can calculate your DTI.
- Your Job and Job History Matters
Have you held the same job for at least two full years? If not, you might benefit from waiting until you have. Lenders use two years as a basis for approving loans.
- A Mortgage Calculator Is a Helpful Tool
It's hard for many people to know how much they can really afford to pay for a house but you can figure this out by using an online mortgage calculator. Doing so will give you a good idea about your price range before you even apply.
- There's Multiple Types of Loan Programs
Did you know that there are multiple different types of loan programs? Lenders determine which programs people qualify for as they evaluate mortgage loan applications.
You might qualify for just one type or for multiple types but you should always compare the options you have to choose the best one.
- You Might be Able to Buy Down Your Interest Rate
The interest rate you qualify for is based on the loan type, your credit, and other factors. An important thing to know is that you might have the opportunity to buy down your rate by purchasing points.
- Fees and Closing Costs Vary by Lender
Another helpful thing you should know is that fees and closing costs vary by lender and by loan program. Shopping around is an option you have when applying for a mortgage, and this is a good way to compare fees and expenses.
- A Preapproval Is Not the Same as an Approval
When you're applying for a mortgage, the lender will preapprove your loan if you meet all the criteria. This preapproval does not guarantee the lender will approve the loan when the time comes.
An approval does not actually take place until the entire mortgage loan application is approved through an underwriting department.
Your Next Step: Get Ready to Fill Out Your Mortgage Application
Taking the time to learn these things can help you walk into the process fully prepared and with a good understanding of what to expect when applying for a mortgage.
If you're ready to buy a house and want to begin working on your mortgage application, you can do so with confidence!
Check out our blog for more helpful information.
