Buying a Home involves what’s probably one of the biggest transactions you’ll make in your lifetime, and it can definitely be a bit complex at times. Not to worry, though! Things are always easier if you’re prepared. If you’re looking for a mortgage, one of the first conversations you’ll probably have early in the process is with a Mortgage Loan Originator. Here are five key questions to ask so that you can be as ready as possible to move forward.
1.What Can I Expect?
You should first get an overview from your mortgage lender’s Home Loan Expert on how the whole process works. When you’re looking to get a mortgage, many of the elements of the process are the same:
- While speaking with the Mortgage Loan Originator, you’ll go over your goals for the mortgage, whether you’re looking to buy a new home or lower your current mortgage payment.
- Your credit is pulled to see what you qualify for.
- Be ready to provide documentation on your income and assets.
- The loan is underwritten. In this step, your income and asset documentation is verified. The lender also will have to order an appraiser and look at the current value of the home you want to buy or refinance. This expense will be pay by the borrower normally.
- Your loan closing takes place. At this point is where you are happy “Yes you Got it” and sign the paperwork.
2.How Strong Is Your Mortgage Approval?
When you go shopping for a home, it’s natural to want to know exactly how much you can afford. Any mortgage lender will give you a letter that says exactly how much you’re approved to offer and start searching for your Home base in what you can afford (Some lenders call this pre-approval)
Unfortunately, not all approval letters are created equal. Knowing just how strong your approval is can help give both you and the seller you’re trying to impress confidence during the offer process. Your lender should be clear about exactly what you’re getting.
A Prequalified Approval is the simplest form of approval letter you can get. A lender pulls your credit. This gives the lender an idea of your monthly debt payments for anything reporting on your credit. This is typically everything from revolving debt like credit cards to the things paid on installment such as student loans, auto loans, personal loans, and of course your future mortgage payment. The lender also receives your median FICO score for qualification purposes.
In a Prequalified Approval, lenders then ask you for verbal (unverified) estimates regarding your income and any assets you want to use toward qualification for the mortgage.
Your monthly debts are compared with your stated income to help the lender determine your debt-to-income (DTI) ratio. Mortgage investors want to make sure you have enough play in your budget not to be spending everything on your debts, so there are guidelines in place. The requirements for every loan are different, but a DTI ratio of around 43% after your mortgage payment is added is a good measuring stick.
Because your income and assets are unverified in a Prequalified Approval, this can provide a good estimate for you of how much you can afford, but an estimate is all it is. Sellers will be treated as such and may choose to put your offer below that of another buyer who has had their income and assets physically looked at during the approval process.
A Verified Approval uses the same qualification factors as a Prequalified Approval and your credit is pulled the same way. The only difference is that you share your income and assets statements with us so that both your income and assets can be validated by our team.
One of the big sticking points for sellers is the importance of making sure the deal goes through. Getting a Verified Approval gives your offer a level of strength on par with that of a cash buyer because the seller knows we’ve checked it out and you can afford what you’re offering.
5.What Paperwork Do I Need?
Next, you should go over what documentation you’ll need to provide to move the process forward. When you start the paperwork for a mortgage, lenders are typically going to ask for the following from you:
- Last 2 years of tax returns (All Schedules)
- Last 2 years of W-2 or 1099
- Pay-stubs for the last 30 days
- Two most recent bank statements
- Clear copy of your Driver’s License or valid ID
- At least 24 months employment history
- If you own a property. Current mortgage statement
These are just guidelines, though, as there may be specific documentation that’s necessary for your specific loan. For example, VA loans require a certificate of eligibility from the VA. For this type of Loans ask your Mortgage Loan Originator as soon as possible what documentation will be required so that you can make sure you have everything you need.
6.When Will I Close?
Each loan is different and underwriting process as well, depending on the loan program, different requirements and appraiser schedules can slow things down just a bit. Most loans will close normally between 30 to 45 days, but things can vary hopefully your will be in 30 days.
7.How Often Will I Get Updates?
Getting a loan is not like buying product or clothes online – it takes weeks, not minutes. We are sure that your Mortgage Loan officer will be happy to give you an update as soon as the process move forward we advise you to keep calm and wait for the good news. Even if you turn in all your paperwork in a timely manner, there are a lot of moving parts to the process. There’s the appraisal, setting up title insurance and lots of other details to take care of.
8.How Can I Avoid Delays?
With a transaction as big as a mortgage, there are certain things you want to avoid doing.
Common mistakes include applying for other financing (such as for a new car or furniture) at the same time you’re trying to buy a house. This can drop your credit score and even worse, you can be denied. Additionally, any large deposits you make have to be sourced, which can cause issues at times.
The best way to handle this is to ask your Mortgage Loan Originator Expert before making any big purchases or changes. They’ll be able to guide you in the direction that makes sense for your loan and situation.