Taking out a mortgage is the most common way that people buy a home, as many people don’t have the cash to pay out of pocket. Learn more about the process below.
Getting pre-approved for a mortgage increases your chances of buying a home because the seller will know you will have the money (or funding) to buy it. Pre-qualification involves going over your income, debts, and down payment. Pre-approval means a mortgage lender has committed to loaning money to you.
Apply for a Loan
Applying for a loan will require various financial records and paperwork, as well as a credit check. Information and records you will need include:
- W-2 documents or tax returns from the past two years.
- Proof of gross income from the past 30 days.
- Proof of any investment incomes.
- Lists of creditors.
- Two months of your banking statements.
Choose a Loan & Get Approved
Choose a type of loan that works for you. After you’ve chosen one, your lender will make the decision on whether to offer you the loan or not, and if accepted will include any conditions for home repairs. The four different types of loans are:
- Conventional: A fixed-rate loan can be chosen for a 15-year or 30-year period, and the payment stays the same until you pay it off. The interest rate on a variable rate loan can change during the loan period.
- Hybrid: A hybrid loan usually has a fixed rate for a certain period of time, and then changes to a variable rate loan.
- Government Program: Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans usually require a smaller down payment and have lower interest rates.
- Bridge: Bridge loans exist to help a home buyer close on their new home before selling their current home.
Close on the Home
Closing on a property will include a walkthrough and an appointment conducted by an attorney.
Bring the following documents to your appointment:
- A certified check for the total amount of your closing costs.
- An acceptable form of photo ID.
- Your personal checkbook.
- Evidence of mortgage insurance (if this information has not already been requested).
Closing costs generally include the following:
- Attorney’s fees
- Property taxes (to cover the tax period up to that date)
- Loan origination fees (this covers the lender’s expenses)
- Recording fees
- Interest (paid from the date of closing to the 30 days before first payment)
- First premium of mortgage insurance
- Title insurance
- Survey fees
- First payment to the escrow account for future taxes and insurance
- Loan points (A “point” is a fee that equals 1% of the loan amount. They enable you to secure a lower interest rate for the mortgage.)
- Home inspection fees (if you choose to have an inspection)
- Any additional preparation fees