Since the earliest iteration of the quintessential American Dream, homeownership has been the pinnacle of success for most people. However, paying for a home upfront in cash isn’t always an option. Instead, many people opt to get a mortgage—and a lot of them are utterly overwhelmed by the concept.
For first-time homeowners, in particular, the process of applying for and obtaining a mortgage is intimidating. However, by finding the right mortgage lender, reconciling your budget, and researching each step of the process, you can make it an easier time, bringing you into your new home sooner and with less stress.
1. Work on financial wellness.
Before you put work into getting a mortgage, you must pay attention to your existing financial situation. The best private mortgage lenders expect your credit score and other economic factors to depict you as a trustworthy borrower.
Without a solid credit score, you’ll face a higher interest rate and less favorable terms. Further, you’ll want to make sure you can afford your down payment, closing costs, and monthly payments on top of current expenses?
2. Consider your options.
When it comes time to find a mortgage, you have a lot of factors to consider. Do you want a USDA loan, VA loan, or FHA loan? Adjustable or fixed-rate? First, take some time to determine what type of home loan and lender is right for you, as well as what additional investments you might have to make, such as types of a home warranty, insurance, service fees, and protection plans. Then, compare offerings from home warranty providers and companies such as AFC Home Club to find the best fit for your needs.
Are you concerned about protecting your most critical appliances, like the refrigerator, or all the equipment you’ve invested in? What about systems, like air conditioning, plumbing, or electrical systems? Depending on the options you require, these additional factors can make sure you‘ll be able to afford those costs and your mortgage payment.
3. Pick your top contenders.
Once you’ve found the range of mortgage terms, interest rate, down payment, mortgage payment, and other factors for your mortgage, it’s essential to consider which options work best for you. Then, rank your preferred choices and research each of your favorites further. You’ll be applying for a mortgage based on these comparisons, so it’s crucial to study each one carefully.
4. Aim for preapproval.
While it’s not an obligatory step, being preapproved by three lenders or more offers a range of benefits. With a preapproval letter, you‘ll know upfront what sort of houses are in your budget. To sellers, it will be clear that you’re serious about buying a new home, proving that you can afford to buy the house. Perhaps most importantly, you’ll know before you tour houses what acceptable terms you can expect—well before you fall in love with a home you otherwise can’t afford.
5. Submit your formal application.
Preapproved or not, you’ll still need to apply for your home loan. First, you’ll need to provide up-to-date financial information to support your application, such as tax returns, proof of income, and other documentation. Then, your lender will offer you an initial loan estimate, giving you further insight into your potential terms and whether they’ll work with you in actuality.
6. Move through underwriting.
Put simply, underwriting is the process in which your lender verifies your information, such as your income, debt, and details of the property. Your lender will primarily perform underwriting behind the scenes but might reach out to you and any co-borrowers for additional documentation or details. Essentially, the best mortgage lender wants to have the peace of mind of you’re the best borrower and can manage your prospective mortgage rate.
7. Prepare for & progress through closing.
Once your final loan is approved, you’ll be able to prepare for closing and finally close on your home. At this stage, you’ll purchase home insurance, perform a final walkthrough, and work through the necessary paperwork alongside your broker, real estate agent, and other representatives.
After you’ve completed these steps, your new home will be yours—as will the responsibility that comes with it. If you’ve prepared your finances in advance, selected the best lender, and found an option like, you’ll guarantee that that stress will quickly minimize, if not disappear entirely. Perhaps the most important benefit, though, is that getting a mortgage could seem far more doable, no matter your experience or lack thereof.