How to Get a Mortgage: This is one of the most popular Google searches among those looking to buy a home. If you want to own a house through a mortgage and you don’t know the procedure to follow, or maybe you don’t really know much about mortgage loans, this article is for you. Read on to learn more about house mortgage loans, their types, and the procedure to get one.
How to Get a Mortgage
A mortgage is an agreement between a borrower and a lender that allows the borrower to borrow money to purchase or refinance a home and then gives the lender the right to take your property if you fail to repay the money you’ve borrowed.
Before going into the steps to get one, kindly note down these key features of a mortgage:
- They are loans that are used to buy homes and other types of real estate.
- In getting mortgage loans, the property serves as collateral for the loan.
- They are available in a variety of types, including fixed-rate and adjustable-rate.
- The cost will depend on the type of loan, the term (for example, 30 years), and the interest rate that the lender charges.
Mortgage rates can vary widely depending on the type of product and the qualifications of the applicant.
House Mortgage Meaning
What Is a Mortgage? It is a type of loan used to buy or maintain a house or other types of real estate. Here, the borrower agrees to pay the lender over time, typically in a series of regular payments that are divided into principal and interest. The property then serves as collateral to secure the loan.
Furthermore, a borrower must apply for a mortgage through the lender they prefer and ensure that they meet several requirements, including minimum credit scores and down payments. However, applications go through a rigorous underwriting process before they reach the closing phase. And the type of mortgage you get varies based on your needs, such as conventional and fixed-rate loans.
Where To Get A Mortgage
There are many options for where you can get a mortgage. You can get one through
- A credit union
- Mortgage-specific lender
- Online-only lender
- Mortgage broker
No matter the option you choose, compare rates across types to make sure that you’re getting the best deal.
Types of Mortgages
These come in a variety of forms. Thus, the popular types are 30-year and 15-year fixed-rate mortgages. Some loan terms are as short as five years, while others can run 40 years or longer.
However, within the different term lengths are numerous types of home loans, including Federal Housing Administration (FHA) loans, U.S. Department of Agriculture (USDA) loans, and U.S. Department of Veterans Affairs (VA) loans, available for specific populations that may not have the income, credit scores, or down payments required to qualify for conventional mortgages.
Below are just a few examples of some of the most popular types available to borrowers.
- Fixed-Rate Mortgages
- Adjustable-Rate Mortgage (ARM).
- Interest-Only Loans
- Reverse Mortgages
These are examples of popular mortgage loans.
What Documents do you need to get a Mortgage?
You should have the following documents to complete the lending process:
- Previous years’ tax returns
- A Proof of income
- Bank statements
- A Proof of employment and employment history
- Brokerage statements
- Documentation of other assets and debts
- Documents outlining any gifts you’ve received to help pay for the home
- Rental history
Your lender may request other specific documents that it wants to see.
Steps to Getting a Mortgage
To get one, do the following;
Step 1: Have excellent credit.
A strong credit score shows mortgage lenders that you can responsibly manage your debt. So, you’re likely to get approved with a competitive interest rate if you have good or excellent credit. If your credit score is on the lower side, you may still get a loan, but you’ll likely pay higher interest.
Step 2: Determine the type of house you can afford.
It’s good to dream big and go for what is good, but it’s good to go for property within your financial range. With rates rising, monthly payments will be higher, so you might have to lower your budget to find an affordable home.
Step 3: Start Saving.
Your first savings goal should be your down payment. You can do this so that you can put the most money down — preferably 20 per cent — to reduce your mortgage loan, qualify for a better interest rate, and avoid having to pay private mortgage insurance.
Step 4: Go for the right mortgage.
Once your credit score and savings are in order, start searching for the right kind of mortgage for your situation. You’ll also want to have an idea of how mortgages work before proceeding.
Step 5: Locate a mortgage lender.
Once you’ve decided on the type you want, it’s time to find a mortgage lender. To get the best deal, it’s important to shop around for multiple offers, not just the lowest interest rate. Be mindful of the lender’s fees when evaluating your options.
Step 6: Obtain Loan Preapproval
It’s a good idea to get pre-approved after finding a suitable lender. With this preapproval, the lender will review your finances to determine if you’re eligible for funding and the amount they’re willing to lend you.
Note: Mortgage preapproval is different from prequalification. A mortgage preapproval involves much more documentation; prequalification is less formal and is a way for a lender to tell you that you’d be a good applicant. However, it doesn’t guarantee any particular loan terms.
Step 7: Begin looking for a home.
Once you have a preapproval at hand, you can begin seriously searching for a property that meets your needs. Take your time to search for and choose a home that you can envision yourself living in.
Step 8: Complete and submit your loan application.
Once you’ve found a home you’re interested in purchasing, you’re ready to complete a mortgage application. Nowadays, most applications can be done online, but it can sometimes be more efficient to apply with a loan officer in person or over the phone. Applying in person: you might be better able to establish a relationship with the loan officer in person, too, which can work to your advantage if you have questions in the process or issues come up.
Step 9: Wait for the Final Decision.
The fact that you are pre-approved for a loan does not mean you will get the funds. The final decision will come from the lender’s underwriting department, which evaluates the risk of each prospective borrower and determines the loan amount, how much the loan will cost, and more.
Step 10: Finish the Closing Process on Your New Home
Once you’ve been officially approved, you’re nearing the finish line. All that’s needed at that point is to complete the closing.
However, the closing process differs a bit from state to state.
How do I get started with a Mortgage?
10 Steps To Getting A Mortgage
- Save hard for a deposit.
- Check your credit report.
- Work out how much you can borrow.
- Get an agreement in principle
- Get your paperwork in place.
- Establish the right mortgage type and term.
- Enlist the help of a good mortgage broker.
- Make application.
What are the four things you need to qualify for a mortgage?
Standards may differ from lender to lender, but there are four core components that lenders will evaluate in determining whether they will make a loan:
- Collateral and
- Credit Score.
How do you know if I would qualify for a mortgage?
The 5 factors that determine if you’ll be approved are:
- Your credit score.
- Debt-to-income ratio.
- Your down payment.
- Work history.
- The value and condition of the home