Buying a house can be very stressful and most people are in a hurry to make their purchase. A mistake often made by buyers is their failure to fully understand the loan process and how long it takes to get a mortgage approved and closed. Below is the useful information for first time buyer mortgages.
First off, when you apply for a mortgage to buy a home, you need to determine if you can qualify for the loan. Lenders require income information from your last two years, including W-2 Forms, as well as bank statements. The lender will also look at your credit score, debt ratios and other factors that may impact your ability to qualify for the loan.
If there are credit issues, such as late payments or judgments, it could take longer to get an approval. It is important that you know what information is needed before you apply for the loan so you can avoid any unnecessary delays in getting your loan approved and closed.
The other issue that affects time frames is the type of property being purchased and how quickly the seller can get all paperwork signed and returned. If it is a short sale or foreclosure property, then expect delays if there is an attorney involved or if there are multiple parties who must sign required documents.
Buying a house is one of the most exciting and stressful endeavors you’ll ever undertake. There’s so much to consider: location, square footage, lot size, school district, price range. And then there’s the most important factor: financing the purchase.
There are many factors that go into determining whether a mortgage lender will approve you for a loan. These factors include your income, debt level and credit history. But sometimes it’s not clear what information lenders will need from you.
Here are six things you need to know before applying for a mortgage:
1) Know your credit score
2) Know your financial situation
3) What can you afford?
4) Gather all the necessary documentation
5) Consider reaching out to a mortgage broker
6) Decide how long you want your mortgage term to be
Before applying for a mortgage, obtain both your credit score and your credit history report. Review the report to make sure there are no errors that could result in a lower rate. It’s also a good idea to check your credit score regularly to see where you stand so you know what interest rate lenders will offer you.
The credit score is a three-digit number ranging from 300 to 850 that gives an indication of how likely you are to pay back debt on time. The higher the score, the better: a score over 720 (up to 850) is considered excellent and will get you the best rates.
A typical lender won’t give you a mortgage if your credit score is below 680, although this varies depending on where you live and who’s doing the lending.
Another thing lenders look at is how much money you have for a down payment when purchasing a home. This shows that you’re able to save money and meet long-term financial obligations.
If you put down less than 20 percent, or if your equity stake is less than 20 percent after closing, you’ll likely have to buy private mortgage insurance (PMI), which protects the lender in case of default but adds to your monthly payments.
