Are you looking to get a home purchase loan but aren’t quite sure how to do it?
A home purchase loan, also known as a mortgage, is probably the biggest type of loan you’ll take out in your life. Before you take out a home purchase loan, it’s important to understand the process.
Read on to learn how to get a home purchase loan in five steps.
1. Check Your Finances
Before you dive into the mortgage process, you need to make sure you’re financially prepared for homeownership. Ideally, you want to have all of your major debts paid off, and you should have enough money for a down payment.
The most popular type of home purchase loan, a conventional mortgage, typically requires buyers to put at least 3 to 5 percent down. For example, if you buy a house for $250,000, you should expect to pay $7,500 to $12,500 for your down payment.
Additionally, you may also need to pay for a real estate agent, a real estate attorney, and a home inspector. You should also check your credit score to ensure you can get a good interest rate on your mortgage.
2. Choose the Right Mortage
Once your finances are in order, it’s time to choose the right mortgage. While most people take out conventional loans, you should also look into FHA loans, USDA loans, VA loans, and jumbo loans.
You also need to consider whether you want your mortgage to be a fixed rate or an adjustable-rate. Fixed rates are popular because the interest rate doesn’t change over time.
With an adjustable-rate mortgage, the rate starts out low but can fluctuate upward. If you don’t plan to stay in your new home long, an adjustable-rate mortgage may be the better bet. You can check out this guide to learn more about home loan rates.
You should also consider the mortgage term. Most people opt for 30-year mortgages, but you can also look into 10 and 15-year ones.
3. Look Into Mortgage Lenders
After deciding on the type of mortgage you need, it’s time to look into different mortgage lenders. To find the right lender, shop around and compare rates and terms from multiple lenders.
If you don’t shop around, you’ll likely leave money on the table. You can also work with a mortgage broker who can do the legwork by gathering quotes from multiple lenders.
4. Get Preapproved
Getting pre-approved is another very important step in the home loan process. Getting pre-approved shows sellers that you’re prepared to make a solid offer.
We suggest getting preapproved by at least three lenders so you have some options.
5. Submit an Application
Even if you’ve been pre-approved for a loan, you still need to submit an application that details your most recent financial information.
Some materials you may need to submit include:
- Pay stubs from the last 30 days
- W2 forms from the past two years
- Proof of income
- Recent bank statements
- Social security number and identification
Depending on the type of mortgage you’re getting, other types of documentation may be required.
Home Purchase Loan: Time to Get Started
Now that you know how to get a home purchase loan, it’s time to get started. By following the steps above, you’ll have a great loan in no time.
Be sure to check back in with our blog for some more home buying tips.
