Unless you are planning to pay in cash, purchasing a new home means that you will have to get a mortgage. This process is handled through a lender, rather than your real estate agent. This is one more person that you will need to build a relationship with and trust so that you can find your dream home. Your agent can help you find a great lender to get you on the path to securing the funds needed to close on your new home, but you are going to need to do a little homework of your own, too. Knowing what to do to prepare and what questions to ask will make the entire lending process seem much less intimidating when you are ready to get started:
- STOP BORROWING AND SPENDING
When you are ready to buy a home, that is the time to stop major spending. All big purchases should cease as well as any applications for lines of credit. Instead, save everything that you can and keep your funds steady. Opening a new credit card or making a big ticket purchase can negatively impact your debt to income ratio when you are trying to get approved for a mortgage.
- MEET WITH A LENDER
This is your chance to interview who will be handling, quite possibly, the largest transaction you will ever make so come prepared with some questions. You should learn about additional costs associated with the loan, get a loan estimate, find out if they offer to lock in loan rates, and how long they need to fund. The answers to these questions should help you narrow down who will be the best fit to handle your home loan.
- DECIDE WHAT MORTAGE MAKES SENSE FOR YOU
There are a variety of loan types available to buyers. You can read more about choosing the right loan in Mortgages 101. Discuss your income, credit, debt, and budget for a home with your lender so they can make the right recommendations for you. It is important to be forthcoming about your financial situation so your lender can have a realistic view of what you are able to afford and let you know about the programs that will be the best fit for your needs.
- BRING YOUR DOCUMENTS
Once you have found a loan that works for your financial situation, the next step is to get preapproved. In order to get preapproved for a loan, you will need to supply various documents. Your lender will let you know what specific items to supply but at the very least, you will need to bring a completed mortgage application, proof of income, and your identification.
- BE REALISTIC ABOUT YOUR FINANCES
It is important to have a realistic view of your debt to income ratio when going to meet with your lender. While you may be approved for $300,000 after applying for a loan, you may discover that the monthly payment for a $300,000 house is out of your monthly budget. Discuss with your lender how much house you can afford and what the monthly payments will be depending on the variables of down payment amount and interest rate. It is imperative to know this before you get to closing.
- REVIEW ALL DOCUMENTS
Thoroughly read over all the documentation once you are approved. Your preapproval letter will be very important to sellers when you present potential offers in the near future so make sure you are familiar with the language. When you are looking over your loan estimate, make sure you know what each line item means. If you don’t, ask questions.
If you are ready to purchase your new home, contact the lending experts at Metro Brokers Financial at 404.847.2525. They can help guide you through the mortgage maze and make sure you have answers to all of your loans questions.