The Ins and Outs of Getting a Mortgage for First Time Buyers
If you don't have cash in the bank to buy a house you are not alone. The majority of buyers in the market will require a mortgage in order to purchase a house. Since a house is the biggest purchase that most people will ever make, the process can feel overwhelming. But, it doesn't need to.
Types of Mortgage Lenders
Buyers usually think of their bank when they think of obtaining a mortgage, but there are other options available.
- Banks - If you have a good relationship with your financial institution this is a great place to start.
- Mortgage Broker - While a mortgage broker does not write loans, they help you secure the right loan with the best lender available for you.
- Online mortgage lender - Some buyers like the convenience offered through working with an online mortgage lender. The application is completed online and documents are submitted and received electronically. Customer service agents will help walk you through the process if you have questions.
The Mortgage Process
Knowing the steps that a mortgage lender will walk you through during the process can help keep things moving along.
- Pre-approval - This is the first step in the mortgage process and should be started before you begin looking at homes. This is different than a pre-qualification. The pre-qualification process is simple and involves a simple conversation with a lender. When you are pre-approved your lender will look at your identification, tax returns, pay stubs, credit history, and bank statements. Once this is complete the lender will let you know how much you can be approved for.
- Application - Once you have placed an offer that has been accepted you can apply for your mortgage. Your lender will verify your employment, income, assets, debts, property information and the type of mortgage you are applying for. You will be provided with a Loan Estimate that will spell out the details for you.
- Loan Processing - Once your application is complete the lender will order the home inspection, appraisal and title search. If all of these check out well you will continue moving along in the process. Typically you will only be able to obtain a mortgage for 80% of the home's appraised value.
- Underwriting - The underwriter will look at all of the information from your application and loan process to make the decision if you are approved or denied for the mortgage loan.
- Title Insurance - Once your loan is approved title insurance will be ordered. This ensures you can take ownership of the house at closing and protects you from loss if the seller has any discrepancies with ownership of the title.
- Final Walk Through - 24 hours prior to closing you can complete a final walk-through of the property.
- Closing - On closing day be prepared to sign a lot of documents. Bring two forms of identification with you and a cashier's check for any closing costs or other fees you are required to pay at closing (unless you are setup to make this payment electronically).
Before starting the process find a mortgage lender that you are comfortable working with. Talk to several different lenders and compare rates and reputation. An experienced lender will guide you through the process.