Lay the Groundwork
Before contacting a lender, start the discovery process by getting a ballpark idea of how much you can afford and what your monthly payments will be. You may also want to begin reviewing your financial situation. Improve your debt picture by closing all dormant credit card accounts and lowering the balances on existing accounts. You may need to reduce your spending to save for a down payment and closing costs. It's never too early to review your spending, cut out excess spending and set a budget.
Choose a Lender
Find a lender as early in the home buying process as possible — even before you start shopping for your home. This way you'll be ready to apply for a mortgage the instant we find a home you want to buy. Research their history and choose a lender with a good reputation. Check with your real estate agent - he may suggest a reputable lender with whom he has worked in the past.
Take advantage of loan pre-approval. Pre-approved borrowers are able to save time by targeting the finest homes within their price range and are often given preferential treatment by sellers. Pre-approval also adds efficiency to the entire loan approval process. The closest thing to a guaranteed loan comes with pre-approval. See our checklist of items you will need to gain mortgage pre-approval. Get Pre-Approved
Choose the Right Loan
Today's market offers a variety of mortgage loans catering to the needs of homebuyers. In fact, there are just about as many financing options as there are homes to buy. They can be divided into the following two basic types of loans.
Fixed Rate Loans: The fixed rate mortgage provides the borrower with an interest rate that will never change over the life of the loan. Fixed rate loans are generally repaid over 15-30 year terms.
Adjustable Rate Loans: The adjustable rate mortgages (ARMs) have interest rates that are subject to change on a regular basis, based on market conditions. Some ARM rates adjust annually, others change every several months or are fixed for a set number of years and adjust annually after that. In order to protect the borrower, many banks place a rate cap on their ARMs to limit the amount the rate may rise annually and over the life of the loan. Borrowers should still take caution to make sure their income will support any possible increase in the monthly payment before selecting this form of financing.
Contact a loan officer to find out more about 100% and Low Downpayment Conventional Loans, First Time Homebuyer Loans, FHA/VA Loans, Jumbo Loans, No Ratio/Income/Asset Loans, Low FICO score loans, and Construction Financing.
Loan Application and the Approval Process
After you have an accepted contract on a house you complete your loan application and begin approval for your mortgage. If you are already pre-approved this process will be streamlined because your lender already has most necessary loan documents. Fees and downpayments are discussed and you will receive a Good Faith Estimate itemizng the rates and associated costs for the loan. Once your file is complete it is given to underwriting for approval which generally takes 24 to 72 hours.
Once your loan is approved your lender will let you know your financing has gone through. The details of the loan commitment including the interest rate, the montly payment and the closing date will be given to you.
The loan closing is the legal transaction in which the approved title to a property is formally transferred from the seller to the buyer. As soon as possible after your loan is approved closing is arranged. Your closing, which will take about an hour, is where you will sign closing documents and pay closing costs. Generally closing costs will equal 1% to 4% of your mortgage amount.