Buying a home is an exciting time. A new home means you have ownership in a place you can call your own and can build equity. Before you become the owner of a new home, you must go through the process of applying for a home loan. This requires some planning in advance, so you're ready for the steps involved and requirements that are necessary to buy a home. Here's what you need to know when you apply for a home loan – before, during, and after the process.
Prepare for Financing a Home
A loan for a home requires a check of your credit history. It determines if you get approved for a loan and the interest rate that you will qualify for. Since your credit history will either make or break your chances to qualify for a home loan, you need to do some research in advance.
Get a copy of your credit score from www.annualcreditreport.com. This website is authorized by the Federal Government and allows you access to a free copy of your personalized credit report for free every 12 months from each of the credit reporting companies. Three credit reporting agencies can send you a copy of your report: TransUnion, Equifax, and Experian.
After you receive your credit report, review it and verify the information. If you find errors, report them to the credit bureau agency immediately. Verify the corrections and ensure that adjustments have been made accordingly to your credit score.
In most cases, you'll have to pay a down payment on the house you want to purchase. In general, you should save a minimum of 3.5 percent for an FHA loan to up to 20 percent for some traditional mortgage options. Different types of loans will have different down payment requirements. Once you have researched the type of home loan that you'll apply for, try to save at least the minimum requirements set by those standards.
Applying for a Home Loan
Try to get pre-qualified for a loan before going through the entire mortgage process. This will show the seller that you're serious about buying a home. In most cases, It will also ensure that you'll be approved when applying for a loan to purchase a specific home.
Once you've determined the lenders you want to consider, it's time to start applying for a home loan.
Filling Out the Mortgage Application
You can either fill out a mortgage application online or talk to a representative on the phone to fill out your mortgage application for the lenders you choose to shop. Mortgage applications follow a specific format that's called the Uniform Residential Loan Application. This application hasquestions that ask you about your finances, debts, employment, assets, the loan you're requesting, and the property.
After submitting your applications, the lender will review your credit information without affecting your credit score. To ensure that the property you're interested in doesn't have problems that might cause you to back out of the offer, have a home inspector review the property.
Review Your Loan Estimates
Applying for home loans through different lenders will allow you to compare the various options and choose the best terms and costs for you. Consider how long you expect to own the home when you compare offers.
Look carefully at what the "comparisons" section of your offer from each lender. That will tell you the total cost in five years, the principal paid in five years, APR, and percent paid in interest. Ask each lender questions that arise when you review your offer.
Choose a Lender and Start the Loan Process
Once you've determined the lender that best fits your needs, tell them that you've chosen them. There's an expiration on the offer from each lender. Review and make your decision before that deadline to lock in the rate.
When you're ready to proceed, your lender will process the loan in greater detail. They might ask you for additional documents and other requests. This part of the process can take several weeks to complete. Respond to those inquiries as soon as possible to keep the process moving.
An underwriter will review your information and determine if you're a good candidate to receive a home loan. Once the underwriter greenlights your loan, it will be cleared to close. At this point, you’ll be ready to move forward on owning a new home!
Are you ready to move into your next home and apply for a home loan? If you have more questions, give our experts at NASB a call at 855-465-0753.