The process to get a mortgage loan approval is comprehensive and sometimes hard for borrowers, according to Bank Rate. But people with steady jobs can attain their dreams of owning a home. Individuals buying a single-family house rather than a condo or townhouse usually have a lot easier time searching for a home loan.
Initial Application
The first step toward obtaining a mortgage approval is to actually apply for your loan, according to Bank Rate. If you apply online, in person or over the phone, generally you must provide details about your job, outstanding debts and assets. In the event that you’ve already found a home or have a general idea what type of residence you wish to secure, you’ll also answer questions like whether you plan to purchase a single-family house or a condo, and just how much you would like to borrow.
Submit Documents
Submit copies of documents required by the creditor, according to Bank Rate. You generally must establish your income, assets and source of down payment whether it is from a gift, savings or a grant via a home buyer'therefore bureau. Normal documents include copies of recent tax returns, bank statements and pay stubs.
Lender Review
Now, your prospective lender will likely check your credit and verify some claims you’ve made about income and assets, Bank Rate states. In the event that you’re self indulgent or plan to put down less than 3 percent of the house ’s purchase cost, you will likely have a far harder time gaining approval even in the event that you have good credit. Also, in the event that you recently purchased a car, have a negative credit history or may have greater than two months’ worth of mortgage payments in the bank after closing the loan, your odds of approval will also be thinner. In the event the loan-to-value ratio isn’t acceptable, like if you’ll owe more about the home than its appraised value, you might also have a tricky time acquiring a mortgage irrespective of your credit standing.
Sign the Contract
As soon as you’re authorized, sign the mortgage contract in the event that you still want the home loan, according to Bank Rate. Make sure that you understand the conditions and are willing and ready to fulfill all terms of the contract, including purchasing homeowner’s insurance. Additionally, remember that the Federal Trade Commission advises people to prevent adjustable-rate mortgages (ARMs) whenever possible. ARMs have variable rates of interest that may dramatically change house payments from year to year. Such loans may put families in an increased risk of foreclosure as a result of problem of frequently determining just how much to expect to pay every month on house payments.
Close the Deal
Your mortgage loan isn’t quite official before “closing,” according to Bank Rate. This process requires that your home meet certain security requirements, that you make any required down payments or cover required document expenses, and that you purchase homeowner’s insurance. Your creditor will also likely purchase an appraisal of the home you want to purchase to make sure you’re not borrowing too much money. Once these steps are finished, you can move into your new home and begin making the mortgage payments.