Financing Guide

Buying a home is an exciting experience, but it can be one of the most challenging if you don’t understand the mortgage process. Many families feel overwhelmed because of the amount of paperwork involved. Knowing what to expect, especially if you’re a first-time homebuyer, will help you make solid decisions about your home purchase.

Let’s be honest: it’s not easy to get a mortgage, but it’s not impossible. In fact, millions of people apply for and obtain new mortgages every year.

Take the first step

Most people begin their research online, but eventually, you’ll have to reach out to a live person to move forward.

Unless you are a cash buyer, you’ll need to choose a lender and get pre-approved before you can start seriously shopping for a home, though it’s fine to contact a real estate agent first to get a referral to a lender. Your finances must be ready before starting the search of your dream home. We would be happy to suggest lenders we have used successfully, who have proven themselves competitive and capable even with poor credit.

Find the right lender

Similar to the process of finding a real estate agent, you should talk with a few lenders to find the best fit for your situation. Remember, while the interest rate you’ll pay is a big factor, it shouldn’t be the only factor. You should also consider the different types of loan options available, their customer service, closing costs and other fees, etc.

Choosing the right loan

Fortunately for buyers, there are a variety of mortgages to choose from. It is in your best interest to investigate each of them to determine which one best fits your situation and your lender is the best person to help you select a loan program to suit your needs. Below is a summary of the most popular types of loans.

• Fixed rate loan: Consider this loan if you prefer the stability of knowing how much your payment will be each month and you plan on living in your home for many years.
• ARM (adjustable-rate mortgage): ARM’s may be suitable if you plan to sell or refinance your home within the next few years. The starting interest rate is typically lower than a fixed rate loan, saving you money initially. Choose this loan if you are more comfortable in taking a risk with your money or if interest rates are very high at the time you take out your loan. On the positive side, the lower initial payments will allow you to qualify for a larger loan than if you choose a fixed-rate. The downside is that your payments will increase if/when the rates go up.
• Intermediate ARM: This hybrid loan offers a fixed rate for the first 3, 5, 7 or 10 years after which the interest rate adjusts with the market every 6 months or year thereafter.

Pre-qualification vs. Pre-approval

A pre-qualification is an opinion from a lender of the maximum amount you can qualify for. The process is fairly quick and based on less information and documentation than is required for a pre-approval. In a competitive seller’s market, an offer from a buyer who is just pre-qualified could lose out to one who is pre-approved.

Get Pre-Approved

There are several benefits to getting a pre-approval letter. First, you will know exactly how much real estate you can afford. When you find your dream home, and are ready to put an offer, you will be in a better position than someone who is just pre-qualified. Finally, being pre-approved reduces the amount of time it will take your lender to fund your loan.

Now that you’ve decided on a loan program, you’re ready to complete a loan application with the help of your lender.

Documents

You will most likely need to provide the following information to your loan officer in order to complete the application:

Paycheck stubs for the past 30 days.
W-2 forms for the past two years.
Information about long-term debts, like car loans, student loans, etc.
Recent bank statements.
Tax returns for the past two years if you’re self-employed.
Proof of any supplemental income.
Once you have completed the loan application, the lender will verify, or confirm, all of the information you provided. Based on the requirements of your loan program, the lender may ask you for additional information. It is very important to cooperate with your loan officer during the application process providing all the documentation needed to move forward as any delay will prolong the process.

Loan Estimate

Shortly after you apply for your loan, you will receive the loan estimate from your lender. It will show estimated fees your lender may charge to process or close your loan, such as mortgage insurance, title insurance and recording fees. The loan estimate will also provide a summary of how your loan will be repaid and itemizes the costs associated with applying for a loan.

Shop for a Home

After you’re pre-approved, it’s time to start house hunting!

When your lender is ready to “close” your loan, you will typically sign loan documents in front of a closing attorney or settlement agent. You will have to bring picture ID and a cashier’s check or wire your funds.

Congratulations on your new home!