Home prices are rising at rapid rates. Not only are homes rising in price year over year, but month-to-month increases are as much as 18%.
The best time to buy a house was two, five, or 10 years ago. But the next best time to do so is now. Prices are going to continue to rise, so if you can apply for a mortgage now and lock in a home purchase, you can enjoy rapid appreciation of your investment.
But if you’re a first-time buyer, the mortgage application process may seem a little daunting. After all, you’re trying to borrow hundreds of thousands of dollars.
Wondering what it takes to begin the process to finance your home purchase? Keep reading our mortgage application guide below to find now.
Prepare Your Finances
One of the most important mortgage application tips starts before you even research mortgage lenders. You need to prepare your finances for the best chances of getting approved.
The most important factor is your credit score. The higher your credit score, the more likely it is you will be approved. And the better your interest rate is going to be, which can save you a lot of money.
Take time to improve your score by looking for errors and paying off any consumer debt you have. Paying off debt also lowers your debt-to-income ratio, which can be a big barrier to would-be homebuyers.
Lastly, you’ll need money for a down payment. Conventional mortgages usually require between 10% and 20% down, while other programs, like FHA, require as little as 3.5% down.
On top of that, you’ll need money for closing costs, which range from $2,000 to $5,000 on average.
Before you apply for home financing, you’ll want to research the best lenders in your area, or the area you plan to buy in. Lenders need a license in each state they operate in. So if you plan to buy a house out of state, research lenders in the new state rather than your current one.
So if you live in California, but want to find a more affordable place to buy a home, such as Idaho, you can check out mortgage lenders like Legacy Real Estate that specialize in Idaho mortgages.
Make sure to compile a list of lenders that offer the program you need, be it FHA, renovation loans, or VA financing. It helps to apply with multiple lenders, as each will have different borrowing criteria and loan terms.
Apply for a Mortgage Online
It’s 2021. The only way you should be applying for a mortgage is online. If a lender doesn’t accept online applications, don’t bother. It’s too much work dealing with paper documents and in-person meetings.
With your list of lenders ready to go, start working through the online applications one at a time. Once you have all of the documents ready, it won’t take long to complete each application.
Documents will include copies of identification, verification of income such as tax returns, W2s, and paystubs, and your personal information and financial history.
Lenders may provide you with an instant quote, but it usually takes a couple of phone calls before they officially provide mortgage approval.
We’ve Approved Your Application
When you apply for a mortgage with multiple lenders, you increase your chances of getting a loan. And if every lender approves your application, you get to choose the lender with the best interest rates and terms.
Once you’re approved, you’ll receive a letter that will allow you to start making offers on homes.
Looking for more tips on finding and funding your dream home? Head over to our blog now to keep reading.