Mortgage 101 – Home Loan Basics

Mortgage rates are extremely low right now and it’s a great time to buy a home in the Tri-Cities!  The mortgage industry has changed–lending standards are tight, so obtaining a loan may be more complicated than it’s been in the past.  Here’s how to plan for your home loan:

1)  Check your credit scores.  You can get a free copy of your credit report from each of the 3 primary credit bureaus each year.  Your loan officer help you, or you can request it yourself (see FTC Credit Report for more info).  Scores range from 300-850.  Make sure you have no errors or past issues to resolve- the bank will look closely at any red flags.  Protect your credit while the loan is being processed–now is not the time to finance a new car or stop paying your bills! 

2)  Shop around.  All loans are not equal–you should shop around to compare, and make sure you’re comfortable with the loan officer (you will be giving him/her a lot of financial info).  Each lender will give you a Good Faith Estimate.  Consider different loan types and payoff schedules.  Be very careful if considering adjustable rate mortgages and read the fine print!  Stick to reputable companies and loan officers who don’t promise more than they can deliver.  We can point you in the right direction! 

3)  Get preapproved.   Your lender will request financial documents, so have them ready.  You can begin with your last few paycheck stubs, W-2 statements, tax returns, current bank statements, and documentation for any large deposits.  Your lender will let you know if any additional documents are needed for the next step, which is prequalification. 

3)  How much can you afford?  The bank will preapprove you for a maximum amount, but many people don’t feel comfortable with the coinciding maximum payment.  The Good Faith Estimate  will estimate your monthly payment (including property taxes and homeowners insurance).  Compare with your current earnings and spending habits to decide for yourself what you can afford, then buy within a range that is comfortable to you. 

4)  Where does the Realtor fit in?  We work closely with your loan officer to ensure things are running smoothly and timely–we may unlock the door for an appraiser, request a preapproval letter adjusted to the offer amount, call to check on the loan at each stage, and ensure the appropriate documents are sent to the Title Company for closing.  All this means a worry-free closing for you!  Your financial documents are confidential between you and the bank–we don’t need to know your income, debt, or credit history. 

5)  What if something goes wrong?  Occasionally it does–we work with you to get around those obstacles.  One of our clients had a lender who asked for 2 extensions then denied the loan (a week before closing).  Unwilling to give up, Nick went with them to speak to the loan officer personally.  Still no luck.  He then took them to the loan officer we used for our personal home loan.  She went to work for them immediately, and they were able to obtain the mortgage and move forward with the purchase of the home.  This happy ending was a relief to both the buyer and the seller! 

Please let us know if you have any questions about obtaining a home loan.  We can point you in the right direction! 

 Mortgage photo credit

 

 

 

 

 

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