If you're house hunting, then you might want to be familiar with home financing. The mortgage process is not a hard subject, but most people still don't completely understand how mortgages work.
Buying a new home is an exciting investment. When you need some financing for your home, a mortgage loan is always your best bet.
Getting a mortgage is not as simple as filling out an application form. The mortgage process is extensive, complex, but systematic.
This piece will break down the mortgage process for you to better understand the entire exercise. Being well informed is important for you to get the best deal for your mortgage. Understanding the mortgage process also improves your chances of landing a mortgage from a lender.
The Ultimate Mortgage Loan Beginners Guide
Basic knowledge of the mortgage process is essential. Luckily, the mortgage process is not rocket science, and anyone with a basic education can understand it.
This piece is a comprehensive guide on the mortgage application process. It is a step by step explanation of getting a mortgage.
Step 1: The Prequalification
Unfortunately, not everyone can be qualified for a specific mortgage loan. So the first step in the mortgage process is getting prequalification.
Prequalification stipulates the amount of loan you are qualified to get. This step is straightforward and most lenders do not conduct extensive financial background checks at this stage.
Your lender will do a surface credit check. You may provide credit information yourself, or they may choose to run the numbers themselves.
Asset information, current income, and your credit score are some of the things your lender may want to know. After a brief review, your lender will provide you with an estimate of what loan amount you qualify to get.
Please note, this is only an estimate and does not represent the final mortgage loan amount. So a low prequalification mortgage amount should not put you down.
Step 2: Get your Paperwork in Order
What you have to do next is to get all your paperwork ready. Depending on your lender, the required documents usually vary.
Here are a couple of documents your mortgage lender may require from you.
-
Your employer's name and address
-
Bank statements for a particular time frame
-
Form 1040, last two years tax return records
-
Information on any bonuses received from work
-
Proof of pension sometimes
For self-employed individuals, you might need information on profits and losses accrued for the year.
Step 3: Application Time, Finding a Good Lender
With your prequalification loan estimate and all necessary documents in place, you are ready to apply for a loan. But first, you have to find an appropriate lender.
At this point, a mortgage broker really comes in handy. A broker helps you through the mortgage process and makes sure you get the best deal. They also take care of most or even all the paperwork.
When applying for mortgages, make sure to explore all your options. It's never a good idea to just try a single lender.
The loan amount should not be the only reason you choose a specific lender. Always compare mortgage rates before settling for a lender. Huge loans may have high rates compared to smaller loan amounts with lower rates.
After you've whittled down your list of lenders to just two or three, you're ready to fill the mortgage application.
Step 4: The Mortgage Application Form
Filling your mortgage application is relatively easy. You can always have a mortgage
