If you’re looking for a home, you’re probably already thinking about loans. What kind of home loan do you need? What is an FHA loan? Before you get started with your mortgage process, know that a September 2016 survey found that nearly 60% of homeowners who already have loans say they wish they better understood all the details of their mortgages. Don’t put yourself in that situation: know how the process works before you even begin, so you’re well-placed to understand the details later.
Go Shopping for the Best Loans
The mistake a lot of people make is looking for loans only after they’ve found the perfect home. It takes time to sift through all the possible offers and understand what interest rates will do, how closing costs work, and all the other important aspects to getting a loan. If you wait till you’ve found the perfect house and are chomping at the bit to secure it, you’ll be more likely to go with something that isn’t good for you in the long run.
You Can Be Pre-Approved
Maybe you’re just starting the process of looking at homes. You can still get pre-approved for a loan, which means you’ll save a lot of time and angst when the moment comes and you find your dream house. Pre-approval means the lender will take a look at your finances and your financial history, look at your income and existing debts, and consider your assets and other factors that will help them decide whether or not it’s reasonable to assume you’ll be able to pay back any loans, and how much you could actually pay back. You’ll then get a pre-approval letter, which is always a great thing to show to sellers. In fact, some sellers won’t really take you seriously without such a letter.
What You Need to Be Pre-Approved
To get pre-approved for loans, you’ll need two years of your W-2 forms and federal tax returns and a quarterly statement of your all your asset accounts, such as checking and savings accounts, as well as stocks or IRAs. You’ll also need your residential history for the past two years and information on any other real estate you hold. You’ll need pay stubs that show your year-to-date income, and you’ll also need to show that you have enough funds to make the down payment. If someone has gifted you the down payment, you need a letter certifying that it is indeed a gift and not a loan.
Getting a House Appraised
No one wants to lend you money to buy something sight unseen. Before you buy, the lender will want to check the house you’re looking at. They’ll want to assess the market value and get an appraisal. If the appraisal is about the same as what you’re paying, then all is well. If it comes in higher than you are paying, this means you are getting a good deal and is even better! However, if the appraisal indicates that the house isn’t worth what you’re paying for it, the lenders will likely only agree to lend you what the home is actually worth. You have to pay the difference or convince the seller to lower their price to match the property’s true value.
Getting the Title
The last big step in your loans is proving that you’re really the rightful owner of the new house. The lender will likely demand a title search, and this means paying someone to check all public records for any random relative or heir who says the property belongs to them, or for liens on the house. Once everything is clear, the place is officially yours!
Buying a home is always a stressful process, but you can take a lot of the worst stress away by taking all the steps you can in advance to make sure things go smoothly when you find the house you really want.