Are you thinking about buying your first home soon? You probably know that you will need to apply for a loan before buying it. However, many people are unsure how the loan process works. Applying for home mortgages are much more than simply filling out an application. They are loans from a financial institution to help cover the cost of the home. Here’s what you need to know about them.
First off, it helps a great deal if you already know your credit score. This is critical because a low credit score can be damaging towards getting pre-approved for a loan. You should also check to see what your debt-to-income ratio is. You can calculate your debt-to-income ratio easily. This can be done by dividing how much you pay monthly for debts by the gross income you make each month.
Pre-Approval Vs Pre-Qualification for a Home Mortgage
Going to a bank or other financial institution for a home mortgage is one of the first actions you should do. However, there is a difference between pre-approval and pre-qualification. A pre-qualification is an assessment of what type of mortgage you qualify for and what you can afford. Many people choose to get this before getting a pre-approval. Keep in mind that pre-qualifications are the lesser of the two.
A pre-approval for a home mortgage works differently. The lender will check your credit plus other financial information. They are looking to see how much you can afford to buy a house. It’s recommended you start getting pre-approved 1-2 months before looking for a house. You should also make sure you have all your financial documents with you to save time.
Shop Around to Get the Right Home Mortgage
Shopping around for the right home mortgage is a key step in the home-buying experience. There are several types of mortgages you can apply for. They will have time periods for how long you’ll be making monthly payments. This can vary from 10, 15, 20, or 30 years. Here is a list of the more common mortgage loans you can apply for:
- Conventional Mortgage – The most commonly used type with the best rates. Usually you need about 10% down with good credit.
- FHA Mortgage – Although used by first time home buyers, it’s also available to anyone. It’s more forgiving of lower credit scores with a down payment of only 3.5%.
- VA Loan – Only for veterans, this type of loan offers zero down payment.
- Fixed Rate Mortgage – This loan features a rate that doesn’t change over the life of the loan. Great for people who love knowing the mortgage payment won’t ever rise.
- Adjustable Rate Mortgage – This one features rates that start out lower than the current rate. However, the interest rate can change after 1, 2, or 5 years.
What to Expect When Applying for a Home Mortgage Loan
You must obtain the actual mortgage loan when you’re ready to put in an offer for a house in Charleston. After you’ve submitted your financial information to the lender, there are a few more steps to the process. Within 3 days of submitting the application, you’ll receive a loan estimate. This will include closing costs and the interest rate. It will also include the amount you’ll pay monthly for the principle, interest, insurance, and taxes. Next, it’ll go to the underwriter who will make the final decision to approve or deny your loan.
We Can Help You Find the House Today
Buying a home is a huge investment. After you applied to get pre-approval on a home mortgage loan, let us help you. At Charleston Home Team Real Estate, we would love to help become a homeowner. We strive to make sure your home buying experience is pleasant and stress-free. Contact us at (843) 628-3960 to get started today!