The first step you will need to take is to secure a home mortgage loan to jump start the process of home purchase. Even as a first-time home buyer, you are aware that a house is a long-term investment that requires thorough planning and financial management.
Let’s take a closer look at the 8 steps that can help you secure a home mortgage loan with expert tips to make the approval process easier. You can also check out the home mortgage loan options given at the end for first-time home buyers.
Step-by-Step Guide For Securing a Home Mortgage Loan:
1. Go Over Your Financial Situation:
Before you start looking for your dream house, it is always a good idea to go over your financial situation to assess your standing on the matter. You should start the loan process by reviewing your credit score, Debt-to-Income (DTI) ratio, and savings. If you are worried about having a low credit score of 580; it’s okay. You can now qualify for a home mortgage loan with this score and even with high DTI ratios of 57% for Federal Housing Administration (FHA) loans and 49.9% for conventional loans. However, you will need to have at least a down payment of 3.5% on hand. You can get all these perks at Dream Home Mortgage, a leading mortgage lender in USA.
Pro Tip: As credit score is an integral role in mortgage approval, you should start off by improving it. You can do this by repaying any standing debts and payments.
2. Make Sure You Get a Pre-Approval for the Home Mortgage Loan:
You will need to get a home mortgage loan approval that signals to sellers that you are a serious buyer. When you apply for a pre-approval, the lenders will check your financial information, credit history, employment history and income. After that you will be given a pre-approval letter, which indicates the loan amount you can qualify for. This helps narrow down your house options.
Pro Tip: Don’t settle on the first offer you get. Shop around for lenders and compare the offers.
3. Decide What Kind of Mortgage Plan Suits You:
There are many different kinds of home mortgage loan options which include but are not limited to:
First Time Home Buyers Program.
VA Loan for Financing Veterans.
Self Employed Loans.
Bad Credit Loans.
Adjustable-Rate Mortgage (ARM)
You can choose a fixed rate mortgage as it gives you a fixed interest rate throughout the life of the loan, while bad credit loan and first-time home buyers' program is great for first time buyers with bad credit score. If you are self-employed, then you can opt for self-employed loans without the need for W-2 forms or employment verification. For veterans purchasing a house, the best option is VA loan that offers 100% finance coverage on down payment and closing costs.
Pro Tip: You need to take into consideration how long you will be staying in the house. If it’s a long-term commitment, then you should opt for fixed-rate home mortgage loan.
4. Gather All Mandatory Documents:
You will need to have all the necessary documents prepared beforehand. This includes your tax returns from the past 2 years, w-2 forms, bank statements; proof of additional income and regular pay stubs. If you are a self-employed buyer, then you will need to present additional documents such as profit and loss statements.
Pro Tip: You should create a folder to keep all the necessary documents in one place to streamline your home mortgage loan application process.
5. Start the Process by Submitting a Mortgage Application:
Once you have chosen a home mortgage loan and have all the mandatory documents on hand, then you can apply for the mortgage application. The lender will conduct a thorough financial review and might ask for additional documents. They will also order a home appraisal of the property you to ensure that the value of the property matched the loan amount.
Pro Tip: You will need to patient during this process as it can take some time.
6. Be Patient for the Underwriting Process:
In the underwriting process, the lender's underwriter will further review your application which includes your credit history, assets, property details and income. During this stage, the lender will evaluate the risk of lending you loan money. The underwriters might also ask for additional documents.
Pro Tip: You need to respond quickly to any requests from the underwriter to prevent any further delays.
7. Get Your Home Mortgage Loan Approval and Start House Hunting:
Once the underwriting process is complete, your home mortgage loan will either be approved or denied. If it’s approved, congrats! Now, you are almost at the finish line. The lender at this stage will give you a loan commitment letter which outlines the term and conditions of your mortgage. This includes interest rates, monthly payments that you will need to make and any remaining condition that you will need to fulfil before closing.
Pro Tip: You should thoroughly go over all the terms and conditions outlined in the loan commitment letter. If you see any discrepancies inform your lender immediately.
8. Seal the Deal!
You are finally at the finish line. All you have to do is sign the necessary paperwork to complete the house purchase. It will include the home mortgage loan agreement and other legal documents that instate the transfer of property to your name. You will need to pay the closing costs which are estimated usually to 2-5% of the home’s purchase price. Once you have signed everything and it is processed, you will receive the keys to your dream home.
Where Can You Get Further Guidance on Home Mortgage Loan Process?
Purchasing a home as a first-time buyer can be quite daunting but this step-by-step guide will help you understand the process better. If you want further guidance and a reliable mortgage broker by your side especially in the state of Texas, then head over to Dream Home Mortgage. With over 25+ years of experience, the expert team at Dream Home Mortgage, under the capable leadership of Mr. Hussein Panjwani, have assisted thousands of American across the 50 states achieve their dream of homeownership. You can also start your journey of homeownership by booking a free 30-minute consultation.
