Navigating the Mortgage Maze: 5 Things You Need To Know Before Applying for a Home Loan
Buying
Over the past few years, the mortgage market has become much more complex. With more borrowing choices and increasingly in-depth loan program guidelines, it can be a difficult maze to navigate. So, how can first-time homebuyers, and even seasoned real estate investors, find their way when applying for a home loan?
Applying For A Home Loan
Here are 5 ways to efficiently secure the funding you need:
1. Clarify Your Needs
If you’re looking to streamline the home loan process, it’s wise to define your needs upfront. Ask yourself a few questions. For example, “How much can you really afford?” “What do you want to achieve with this loan?” What are the essential elements of the loan you’re looking for?” “What is your timeline?” Define where you are able to negotiate and where you simply cannot.
2. Evaluate Your Options
Do your research and shop around before making an actual loan application. Compare the different options available which may include: mortgage brokers, private money lenders, traditional banks, credit unions, online crowdfunding portals, business lenders, etc. and then obtain a pre-approval. A pre-approval letter establishes you as a serious homebuyer, letting the seller know that you can afford to buy their home.
3. Dig Deep
If the HOA’s finances are in bad shape, your mortgage could be declined
Before solidifying anything, take the time to explore the loan program guidelines and criteria. Find out what kind of factors could derail your home loan application or cause the terms to change before the final loan approval. When deciding whether to approve a home loan, lenders often work with a wide range of criteria in addition to your credit score. Unfortunately, even when you think you’ve done everything right, your mortgage terms could still change or worse, get rejected for surprising reasons. For example, some lenders have restrictions surrounding property sizes, home location, down payment, job history, credit card habits, child support, type of loan and even because of the home owner’s association.
4. Trust Your Gut
Don’t be afraid to walk away.
Always trust your gut and be wary of mortgage scams like the bait-and-switch. Unscrupulous lenders bait potential borrowers with an enticing loan offer, such as low monthly payments. The victim puts in the time and effort to prepare for financing until right before it comes time to sign on the dotted line when the lender presents entirely new (and much less favorable) home loan terms. Oftentimes, borrowers end up going through with the more expensive mortgage because they feel they have either already invested too much time and energy in the loan to back out now or they may be fearful that they can’t find the any other financing for their dream home in time.
Never sign off on anything that doesn’t sound accurate. Make sure you can trust the lender before you seal the deal.
5. Prepare Paperwork
Before you try to get a mortgage, you might want to consider paying off debts.
Be over-prepared with the proper paperwork to speed along the underwriting process and fast track your loan to funding. As a new homebuyer, you can’t afford to jeopardize your chances of closing. You’ll need bank statements, tax returns, brokerage statements and employment information. Make sure you have also checked your FICO score before filling out an application for a home loan. Your credit rating is a basic element in your quest to when applying for a home loan. Lenders not only need to feel comfortable knowing that you’ll be able to pay their money back, but high FICO scores can also result in lower interest rates for you, the borrower.
Most loan approvals take anywhere from 30 days to 45 days. But much of this depends on how responsive the borrower is through the process. If you get as prepared as possible before you apply, the approval process won’t be as difficult as you may think.
