Getting a home loan shouldn’t be a complex maneuver with an unending line of hoops to jump through. In an ideal world, it would be as simple as handing over a payment and receiving the keys. Sounds great, right? At the same time, however, you’re making an important long-term investment, so there will need to be a few extra steps to provide you with that valuable protection. But, not to worry! Follow these easy steps to get approved for a home loan.
Step 1: Prepare Your Finances
Before you meet with anyone to discuss mortgage financing, it’s a great idea to take some time and get your finances in order. We wrote a blog about it with the full scoop, but here are the highlights:
- Know your credit score
- Pay off as much debt as is feasible (focus on credit cards over student loans)
- Know what you can afford to pay monthly
- Save up a down payment
Knowing where you are and what you can afford will help make it easier to find the right mortgage financing for your specific needs and financial situation. It will also help ensure that your monthly mortgage payments don’t cause an ongoing strain on your finances.
Step 2: Explore Your Options
Once you know where you’re at financially, it’s time to start exploring your options when it comes to mortgage financing. There are a range of different loan types, each with their own requirements and rates. We suggest meeting with several different lenders to discuss options. Or, to make things easier, you may choose to meet with a mortgage broker. They will work with multiple different lenders and be able to guide you through the pros and pitfalls of different loan options.
While you’re exploring mortgage financing options, you may also want to know what the going rates are in your area. Explore current house listings to see how costs vary from one neighborhood to another.
Step 3: Get Pre-Approved
When you meet with lenders for that initial discussion of interest, you will likely get pre-qualified. This is an informal way for mortgage financing institutions to give you a ballpark range for how much you will likely get approved for and what your monthly payments would look like. This is not, however, a guarantee that they will approve you. When it’s time to really dive into house hunting, you’ll want to get pre-approved. This is a more in-depth process during which a lender will look at your financial history, check your credit, and come up with specifics. This part of the process is important because it shows sellers that you’re a serious buyer and have the financial means to make it happen.
Step 4: Find a House!
Now that you have a pre-approval in hand, it’s time to start house hunting in earnest. Keep your pre-approval numbers in mind, both the amount you’ve been pre-approved for and the anticipated interest rate. Don’t look for houses that are more expensive than your pre-approved amount, as there is no guarantee you will be approved for a loan that large. When you find the right house, put in an offer!
Step 5: Closing
Once you’re under contract, there’s a lot of “hurry up and wait” that happens. You’ll need to sign several documents to start the purchase process. Some of this paperwork will protect your interests and go over any stipulations about the home. Another big part of the closing process is paying your earnest money (if necessary) and getting the financial side of everything squared away. The mortgage financing won’t actually be final until closing, which means those pre-approval numbers may still change. While you wait to close on the house, it’s important to avoid making any major financial changes because the interest rate you were told can still change. During this waiting period, it’s important to keep paying bills as usual, to avoid incurring new debt, and to avoid changing jobs. If you’re planning to buy a car or quit to work for yourself, those are some big changes that can drastically alter your interest rate — and thus your monthly payments.
The team here at Patriot Home Mortgage is here to help you find the best mortgage financing for your needs. Give us a call for answers to all your home loan questions and to learn more about the myriad home loan options we offer!