A guide to getting your first mortgage
You made the decision, and it wasn't an easy one. It didn't happen overnight and you didn't just get out of bed one morning thinking about it, it has been a long term goal for you and many like you that desire the benefits, freedoms and yes, sacrifice of home ownership. If you haven't been stowing away over $10,000 per year since the day that you were born to purchase your new found home in cash in one fail swoop, you will join the enormous majority of consumers and home owners alike in applying for and obtaining a mortgage, the industry term for a home loan.
The initial home buying process can seem overwhelming at first and it really is important for buyers to pace themselves in the many stages they will be going through during this metamorphosis. Many prospective home buyers make the cardinal mistake of perusing through hundreds of real estate listing websites, periodicals, magazines and blogs and may even be working with a potential Realtor who is able to show the local market inventory all in search of their perfect home. They step into a recent prospective home just coming on the market and fall in love... This is it! This is home! But without ever setting foot in a bank or credit union or reaching out to friends and family to find a mortgage loan originator that will look after the biggest section of their home buying journey, their budget, the ride comes to a screeching and depressing halt. For any real estate professional involved in this process there is no worse feeling than watching hard working people not being able to get what they want.
The first step, albeit a scary one for many home buyers is having their credit report pulled. There are many different companies that exist in the pulling of credit reports. Not just pulling reports but keeping tallies on the report, offering credit protection plans, identity theft programs and many other costly options. Before committing to a program, any and all consumers can simply use annualcreditreport.org to obtain the one and only free copy of their credit report. This can be obtained at zero cost per annum. The report itself will only provide accounts that are currently revolving, closed, charged off, and if they have histories of delinquency. It will not feed or show an actual score.
Many home buyers will find their real estate teams to be very diverse and also accommodating to any and all personal and business scheduling types. With present day technology available many home buyers are foregoing the formal meeting processes and completing their applications for loans and credits at home, at work, online and even via mobile application. Though this process is streamlined by technology and many of its components are completed online, on the web and stored in the cloud, it may be a good rule of thumb to meet with your mortgage loan professional in person at least the first time. When it comes to home buying, there is no transaction that feels so very personal, taking that time for consultation in person is invaluable. Not only are these professionals learning about you personally, they will also be asking about your finances in great depth. When questions arise and feathers get ruffled and people find themselves near their breaking point, it's going to be helpful to know that they are comfortable with the faces of the professionals chosen to work on their behalf and not feel like they just divulged their intimate financial secrets and information to strangers over the phone site unseen.
Be prepared to produce documents, and lots of them, starting with at least two years but may be up to several years of tax returns and several months back of bank statements. Lenders will want proof of your income, and they will want to know about all of your debts. They also will also want to know the source of any big deposits. If your parents, grand parents, family friend gift you money for a down payment, the lenders will need a letter documenting just that.
The other thing you’ll need, besides documents, is a monetary reserve. The more, the better. Home buyers will require money for the mortgage down payment. This down payment will include the earnest money given with an accepted home contract, money deposited with a title company up front to show the sellers in good faith that the buyers are serious in purchasing the selected home. The down payment will also include closing costs from the title company and pre paid lender costs such as homeowners insurance premiums, the property taxes, advanced interest and private mortgage insurance for loans that are seeing less than the 20% down payment amount. Lenders will also want to see that one has adequate reserves in case a home buyer undergoes a loss of employment or if the home owners experience losses inside the home including emergencies whether structural, system or appliance related. These are all going to be factors taken into consideration when applying for a mortgage.
Developing and maintaining these habits are incredibly crucial in obtaining your first mortgage. If home buyers are able to source any snags in this preliminary part of the journey, they will save their most invaluable asset, time. The contract writing and offer process on a home does not require a lot of time to prepare once all of the potential financial ducks are in a row. This will streamline the loan approval process and buyers can hit the open market confidently with their lender's pre-approval letter in their back pockets making the offer on the new potential home will make the work and process buyers go through worth every minute. Hang in there and don't let the fear stop you. Industry professionals work with and through challenges every day in this business. The process is all the same but no journey is ever alike. Invest in yourself upfront and reap the rewards upon a successful closing. The journey is long and it may not seem easy, but it is very much worth it.