Your Mortgage Questions, Answered
Getting a mortgage can feel like a scary process. So many questions, paperwork and strange acronyms for words and phrases that don’t mean anything in your everyday life. But, unless you’re coming in with cash, you’ll need to know a little bit about lending to purchase a home. Fear not, it’s not terribly difficult once you understand the basics.
Where do I even begin?
I know it’s tempting to do the looking part of buying a home – a million saved searches, open house and maybe even touring homes with an agent. While it is fun to look around and dream, the best plan is to speak with a lender right away to be sure you have a clear understanding of your budget or the things you’ll need to do to be prepared when you find the right match. Your real estate broker can point you in the direction of a local lender to help you find the best loan program for your needs and walk you through the process.
Is it a good time to buy?
If buying a home is at all a part of your future plans, it’s a great idea to talk with a lender about what you’ll need to get the best rate and qualify for programs that can get you into a home you’ll enjoy. It’s typically true that your monthly mortgage will be equal to or less than the rental for a home of similar size. Plus, you’ll be putting the money you were spending to pay down your landlord’s mortgage back into your own pocket. With housing prices climbing every year, excellent down payment assistance options, and low mortgage rates, it’s a great time to invest in a home.
Prequalification vs. Preapproval, what’s the difference?
Prequalification letters are non-binding and are only based upon the basic information you provide a lender. It’s a good start, but a preapproval is the actual amount a lender is willing to loan you once they’ve verified all of your income and credit information. You’ll eventually need to get fully approved, so it makes the most sense to get preapproved as soon as possible. A full loan approval is the bank’s commitment to lend and it can be a powerful tool in competitive markets.
I’m self-employed, is that a problem?
Not at all. Self-employed borrowers are a little different in that they typically need to provide additional types of documentation to verify income. Your lender can walk you through exactly what will be needed to meet your loan requirements and help you gather the necessary information to get the full loan commitment.
How do I know if a mortgage payment fits my budget?
Lending amounts are determined by basic calculations of income and debt. Your lender can quickly calculate how much you earn and estimate your purchase price range. You can also use a mortgage calculator to get an idea of what the monthly mortgage payment will be based upon loan amount.
What do I need to do to get started?
Your lender will give you a more detailed list depending on your situation, but you’ll generally need documents relating to your income and finances. This includes tax returns, pay stubs and W2’s, bank statements, and a government issued photo ID.
Bottom line, don’t let concerns about the process stop you from buying a home. There are many first-time home buyer resources available and the right partners will help you find, finance, and purchase a home with confidence. Contact me today for a free home buyers guide that includes recommendations for local lenders, tips, terms, and more.