Buying your first home is one of the most exciting milestones you’ll ever experience!
It’s so exciting to picture how your life will change when you have your very own place; the holidays spent there, the projects, and the day-to-day memories.
There is a lot of fun in buying a house, but the home loan process can be quite tricky to navigate.
A home is not a cheap purchase and is a very important investment, and it’s important to make sure the process goes smoothly so you can get the best deal possible.
Read on to find out how to get a home loan.
Find the Right Lender
The first, and maybe the most important, step in taking out a loan is to find the right lender.
A lender is a business that loans you the money that will pay for your home. In turn, you pay that money back to the lender over the length of the loan with monthly payments.
There are a variety of lenders available, from commercial banks to small credit unions. Each lender offers different options for their loans and programs.
It’s really important to do research into a variety of lenders to see which loan program will fit your needs best.
Some key parts to look into are the interest rates, length of loans, and down payment needs. Each of these will affect how much you pay, so it’s in your best interest to speak to many lenders about your specific situation.
Once you find a lender (or a few to keep options open), you can move forward in picking the best loan you qualify for.
Specialty Loans
Some lenders offer specialty programs for taking out a loan that caters to specific needs and situations.
One of these is first-time home buyer loans. These loans offer a variety of options to make qualifying for the loan easier than a traditional home loan. These options include lower down-payment, interest rates, and fees. When buying a house any reduction in cost is a huge benefit!
Another specialty loan is a VA which is for military veterans, current military service members, and occasionally spouses. There is no down payment required and these loans typically offer great rates.
There are a few lenders who offer special first-time home loans for doctors. Because of the potential for a high income, doctors often can use this program to get approved for a loan of a much higher amount than the average applicant.
It is worth looking into specialty loan options if you think you qualify because they offer such big incentives that can make a big difference in what you pay upfront.
About the Home Loan Process
Once you find the right lender for you and decide on the loan option you would like to apply for, its time to start the home loan process.
Here are some of the biggest points in the process of obtaining a home loan.
Check Your Credit Score
All lenders will require your credit score and credit history in order to evaluate what rates and loans you’re qualified for.
A credit score is a way for potential lenders to evaluate how much risk is involved in loaning you money (credit cards or loans). This score uses a system to evaluate how much debt you have, your payment history, length of accounts, and other factors.
Before you apply for a loan, you should get a free credit check to see where you are on the scale. A better credit score obviously gives you a better interest rate and loan options.
The lender will also run an official credit score check during the processing of the application.
Set a Budget
The next very important step in taking out a loan is to look at your budget and see what you can afford.
A mortgage payment is a very large undertaking both monthly and over the life of the loan (usually 15-30 years). You do not want to commit to more than you can afford and get yourself into trouble.
Most lenders have mortgage calculators where you can input all of your specific information to get an estimate on your monthly payment and what the overall loan payment will be.
With this information, you can run the rest of your expenses and see what will fit into your budget.
Gather Documents
After you find out how much you can afford and what you would like to take out for a home loan. It is time to gather the necessary documents to apply for the loan.
In order to submit an application, the lender will require a lot of official statements to prove different aspects of your history. Some of these include tax returns, pay stubs, other asset information, bank statements, renters history, and photo IDs.
Some lenders will allow electronic submission, but some may need physical copies.
Save for Down Payment and Closing Costs
A major part of purchasing a home is the down payment and closing costs since that is the money that you have to have upfront in order to complete the purchase.
When you begin the process of looking for a house, it would be beneficial to start to save for these things so you’re prepared at closing.
Submit Application
Once you have given your lender everything required for the application, they will process it all. After it has gone through the necessary channels and you are approved it is time to find the right house!
Purchase Your First Home
Buying a home is often a very good investment and a major step in a person’s adult life! The home loan process can make that step seem impossible and overwhelming.
But with the right information and help, the process can be simple!
Follow this guide to get started buying your first home. And take look around for more financial advice!
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