The majority of homeowners purchase their homes with a mortgage. The process of getting a home loan is complex, and it can be overwhelming for first-time home buyers. The process can go more smoothly, though, if you know what to expect and how to prepare. The following is an overview of the process along and tips for finding the best interest rates.
Choose A Lender
The first step in getting a mortgage is to find a lender, such as a bank, a mortgage company, or a mortgage broker. You can discover more here about what mortgage loan officers do for their clients. To find the right lender, look for a company that offers competitive interest rates and a variety of loan types. See Current Mortgage Rates, October 5, 2020 | Key rate falls for a comparison of major lenders.
By getting pre-approved for a loan, you can know your upper limit when you start house-hunting. To get pre-approval, you’ll need to provide your lender with some financial information including your social security number, bank statements, recent tax returns, and pay stubs. The lender will also check your credit score. Once you’re pre-approved for a certain loan amount, you can share that information with your real estate and any seller whose home you make an offer on. Pre-approval adds strength to an offer, according to realtimecampaign.com.
Make An Offer
Once you’ve chosen a house to buy, you’ll need to make an offer the buyer will accept and sign a contract. Contracts typically include contingencies to protect both the buyer and the seller. For example, the sale will likely be contingent on the buyer getting financing and the appraisal coming in under the selling price. You should be prepared to make a cash deposit, known as earnest money, as part of the purchase agreement. Earnest money can be anywhere from 1% to 5% of the price of the home.
Apply For A Loan
A loan application is a little more involved than the pre-approval process. In addition to pay stubs, bank account information, and tax returns, you’ll need to provide detailed information about all of your assets and debts. The lender will also need information about the property, including property taxes and an appraisal.
Choose A Loan Type
When applying for a loan, you’ll need to decide which type of loan best suits your needs. For example, you can choose a loan with a fixed interest rate or an adjustable rate that can go up or down by a certain percentage each year. You can also choose the amount of time you take to pay back the loan. SoFi offers 30-year, 20-year, 15-year, and 10-year fixed-rate mortgages. The lender will be able to give you an estimate of what your monthly payments will look like based on the mortgage you choose.
Once you’ve completed these steps, you just need to wait for the underwriter to complete the loan. Underwriting usually takes anywhere from a few days to a week after the application is submitted. You’ll receive the final terms of your loan in a document titled Closing Disclosure. It will list your monthly payments and closing costs, which should be very close to the estimate you received.