When it comes to buying a home, finding one you like is just the beginning. Did you know – getting started on your mortgage is actually the very first step in your home-buying process. Getting a mortgage can be a bit intimidating, especially if you haven’t done it before.
Felling nervous because you’re not sure how to get a mortgage? You don’t have to. Sure, there may be quite a few steps, but this is a task you take on the same way you eat an elephant – one bite at a time.
So here’s a handy little guide we here at The Packer Group put together for you on the steps to getting a mortgage, what to watch out for, and who can help you at each stage.
Step 1 – Find a good lender
Most mortgage companies have similar rates, so what makes one better than the other is customer service and experience. Unfortunately, there’s no good solid way to compare lenders’ customer service savvy besides asking other people who have worked with them.
Just like roofers know the best homeowner’s insurance companies (because they work with them constantly), our Packer Group Realtors have worked with a lot of mortgage lenders. We have seen the benefits of working with good ones, and the damage a bad or even mediocre one can do to a deal. Ask your Realtor for suggestions, and make sure to ask if there are any companies they’d definitely avoid. If you’d like to see the trusted lenders we suggest here at The Packer Group, click here.
When you get your Realtor’s suggestions, compare rates and fees between the different suggested companies. You can do most of that online.
But remember – Don’t make your decision based just on rates. Your lender has the power to make the process simple or overly complex, fast or slow. They can either work hard to solve problems that arise, or cause problems by making mistakes or oversights. Go with a company with a good name and recommendations you can trust. You’ll thank yourself later.
Step 2 – Get Pre-Approved
Sellers don’t accept offers from potential buyers who haven’t been pre-approved for a mortgage, so go ahead and do this step as soon as possible.
To get pre-approved, your mortgage company will look at your credit score, debt-to-income ratio, income, available funds, and other information pertaining to your financial picture. The lender will determine the maximum amount of mortgage you may ultimately apply for. But remember, this is a MAXIMUM, not necessarily what you should plan to spend.
If you have already gotten pre-approved, but have decided you want to have someone else handle your mortgage, don’t fear. Getting a pre-approval from a mortgage lender does not lock you in to using them. Your Realtor can help you with applying with the new company if you so choose.
Step 3 – Find a house
Once you’re pre-approved, you and one of our Packer Group Realtors can start searching for your next “home sweet home.” When you find it, you’ll put in an offer and have it accepted. Your Realtor will take care of the paperwork for putting in the offer, finalizing it once it is accepted, and getting the mortgage process rolling.
Step 4 – Supply documentation
Once your mortgage is processing, you’ll be asked to submit more specific documentation of all sorts of things to your mortgage company. Some things you’ll need to provide include:
- Paycheck stubs
- W2s if you get a paycheck
- 1099s or P&L statements if you own a business
- Documentation of debts, such as credit cards and student loans
- Documentation of all assets, such as mutual fund statements, bank statements, and real estate and automotive titles
- Cancelled checks showing you’ve paid your rent or mortgage
This list is not at all exhaustive. Be prepared to furnish all sorts of documents to your lender. Don’t get frustrated; this is all part of the process.
Step 5 – Appraisal
Once your offer is accepted, your mortgage company will order an appraisal to determine the property’s value. The appraisal makes sure that the house is worth at least the amount of money the mortgage company is loaning you.
You don’t have to worry about ordering it or being present during the appraisal, but you do have to pay for it. The cost for an appraisal typically runs about a few hundred dollars, and the payment may be expected upfront or rolled into your closing costs. Ask your lender when you’ll need to pay for the appraisal.
Step 6 – Buy homeowner’s insurance
The mortgage company will require you to purchase homeowner’s insurance before they will finalize the sale. After all, they want to be covered if your house burns down the day after closing. You want to be covered, too. As soon as you sign on the dotted line, that house is 100% your responsibility.
It’s common practice for your mortgage company to roll your payments for mortgage, homeowner’s insurance, and property tax into your monthly payment. They will automatically renew your homeowner’s policy for you, too. This saves you from having to fork out a big payment once a year, and guards against forgetting to make your payments – which could be tragic if you have a claim and discover you weren’t covered because of non-payment.
While we may not be roofers, The Packer Group has worked hard to put together a list of trusted homeowner’s insurance agents that we trust will take good care of you today and for years to come. For the list of trusted agents, click here.
Step 7 – Lock in your rate
While the mortgage process is rolling along, interest rates are likely to go up and down. You can wait until up to 10 days before your closing date to lock in your mortgage interest rate. If rates are fluctuating wildly day to day, it can pay – or cost you – to wait until just the right moment to lock in your rate. Your mortgage loan originator can help you decide if it’s better to lock it in right away or wait and see which way the needle moves on interest rates.
Step 8 – Down Payment and Closing Costs
After you review all your final paperwork, you’ll need to get a cashier’s check or do a wire transfer for your down payment and closing costs before the date of closing. Your mortgage originator can tell you what date to post the check/transfer.
Step 9 – Closing
It’s the big day! Make sure you read over everything you sign before you sign it, and ask all the questions you need to feel comfortable with the process. Knowledge is power! Today, you walk out as the owner of YOUR NEW HOME! Congratulations!!
Need help finding a mortgage lender?
We work with lenders every single day, so we know who makes the process easy and who makes it tearing-your-hair-out difficult. We’d be happy to suggest some mortgage companies you can trust. Just give us a call at 734-707-7992 today!