Before you even begin looking at homes, find out how much loan you can qualify for. Your mortgage professional can guide you through this analysis. It helps to have the following information handy: income, monthly debts, your assets to cover down payment and closing costs, and credit score.
Unlike determining how much you qualify for, which is based on objective loan officerlines and financial ratios, figuring out how much you can afford requires a thorough examination of your situation. What kind of lifestyle do you lead? Do you like to travel and dine out often or are you more of a homebody? Only you know what your monthly expenses really are, above and beyond what shows up on your credit report, and how much you can afford to pay monthly for your new home.Get a preliminary look at your home affordability with our Mortgage Calculator
No home seller will consider you a serious buyer if you're not pre-qualified. In fact, most real estate agents won't begin working with you if you're not already pre-qualified. A serious pre-qualification involves an in-depth self-assessment of your financial situation and a thorough conversation with a mortgage professional to discuss your options.
We make getting a thorough pre-qualification letter easy with our Affordability Report, which breaks down what assets you can use toward your down payment and closing costs for home purchases, how much of your income you'll be able to use for loan qualification, and what debts will be counted toward your debt-to-income ratio.
With your pre-qualification in hand, you are now ready to get out there, find your dream home, and successfully negotiate a purchase offer. We recommend working with a good real estate agent who will not only help you identify a property but will also work with you to structure the purchase offer and negotiate a solid purchase contract. With our Build Your Team feature, you'll be able to coordinate your real estate agent, lawyer, inspector, and financial professional to make a solid offer.
As soon as you have a purchase contract signed and agreed by all parties, you should send it to your mortgage professional. Having a purchase contract in place is the trigger that allows you to start the mortgage application process.
In addition to the fully executed purchase contract, most lenders will require the following documents before giving you a preliminary approval:
With the initial application packet submitted, the lender can start working on your loan, verifying all of the information provided in the application, ordering the appraisal and property title report. That work is done by a processor, and once he or she feels they have a solid file, it is sent to the underwriter for review. Sit back, relax, and don't forget to go grocery shopping. Your loan should be conditionally approved soon.
"Conditions to close" are requirements the underwriter places on your loan application before giving it its final stamp of approval. Not to fret – this is typical of all mortgage applications. At this point, the process becomes very specific to each borrower; the lender will ask for documents relevant only to your personal circumstances.
For example, if you've been divorced, the lender will probably ask for a divorce decree. Other requests we typically see at this point are the following:
Keep in mind that a lot of these documents can and should be obtained at the point of loan application and submitted to the underwriter in anticipation of being needed. An experienced mortgage professional and a good processor should work together on identifying those items upfront so that the process later on is a lot smoother.
Get your signature hand ready because you'll be doing a lot of signing, but make sure you understand what it is that you're signing. Don't let the process overwhelm you and definitely don't let anyone rush you or pressure you into signing something with which you don't feel comfortable. The lawyer or agent conducting the closing should carefully explain everything to you. If you have your own lawyer, even better. You may even request copies of the documents you'll be signing before the closing so you and your lawyer (if you have one) have time to carefully review them beforehand.
These are some of the documents you can expect to sign at closing:
You're at the homestretch now. If at all possible, hire professional movers, and that doesn't include friends (unless you're willing to sacrifice some valuable friendships). Remember to change your address with the post office and other important service providers such as banks, credit cards, and, of course, Netflix. Enjoy your new home!