Mortgage Process
Although buying your own home continues to be the American dream, most of us will never have the cash needed to purchase a property without a home mortgage. Experts recommend beginning the process by getting pre-approved for a home mortgage before you start shopping for the home itself. While this form of financing can seem intimidating, overwhelming, and confusing if you’ve never been through it before, a step-by-step look at the mortgage process can often make the prospective home buyer feel a little bit more comfortable.
Check Your Credit Rating and Build Cash Reserves
If you’re shopping for new home loans Austin, you may be wondering where you should start. Before doing anything else, check your credit rating and build your savings. In the current economic climate, most lenders look for great credit ratings and a substantial down-payment. Unfortunately, the days of anything-goes mortgages are a thing of the past. While this makes it a little harder to get a home loan, it’s not all bad. With a better credit score and higher down payment, your interest rates and monthly payments are lower. Don’t be discouraged if you initial credit score is lower than expected. Many credit reports are riddled with errors that are easily corrected.
Find A Lender
Identify several lenders that you would consider working with. As a rule of thumb, select your own bank, another major financial institution, and a national mortgage company. Research each one to find out their current interest rates, fee schedules, and whether they service their own mortgages. Find out the details of each mortgage including pre-payment penalties, assumption clauses, and the anticipated closing costs.
Get Pre-Approved
Many consumers confuse the pre-approval process with a pre-qualification. In a pre-qualification, the mortgage lender casually asks your income and expenses to provide a letter that says you qualify for a certain amount. During the pre-approval process, they verify your income, expenses, credit rating, and other information and provide a good-faith approval with an interest rate that’s good for a certain period of time. A pre-approval means that you should be able to rely on receiving a mortgage if nothing changes and the home you choose meets the bank’s standards. Be prepared to provide employment information, pay stubs, W-2 forms, tax returns, banking statements, and information on your current creditors. The lender evaluates your financial situation to determine the amount that you can borrow. This figure plus your available down-payment will set the upper limit for the price of your new home.
Find Your Home
This should be the fun part. Choose a real-estate agent and begin shopping for a new home. When you’ve made a decision, make an offer. Once both the seller and the buyer agree on all terms, a binding contract can be entered into. Be prepared to place a deposit on the home and set a closing date. At this point, the clock begins ticking on everything else that must be done before your new home loans Austin is completed, and you can move into your new home.
From Contract to Close
Between the time that you sign the contract and close the deal, many items must be taken care of. On your part, call your lender to lock in an interest rate and a home inspector to schedule a home inspection. If any defects are revealed, ask the seller to repair the home. They have the choice of making the repairs, offering to discount the home, or just saying no. If they say no, you can usually cancel the sale. The seller must have several inspections of their own completed including a termite inspection. During this time, arrange to purchase a homeowner’s policy and provide any additional paperwork to the lender. The lender arranges for an appraisal on the home to ensure that it’s worth the stated amount. In some cases, you may be required to sign a statement that discloses the source of your down payment.
Closing on Your New Home
On closing day, you and your realtor will walk through your new home to make sure that it meets with your approval. If any damages are present or anything is missing, this is the time to speak up. Next, meet with your real-estate attorney to complete the final paperwork and provide a check to cover the remainder of the down payment and closing costs. Once everything is signed for your new home loans Austin, your lawyer will hand you the key, and you are now the proud owner of a new home!
