Buying a home for many people is one of the biggest investments they will ever make. From the pre application process to closing costs, understanding how to successfully acquire a mortgage can be tough. Below are three points to help you navigate the home buying experience and subsequent mortgage process.
The Pre-qualification process
You have decided that you want to buy a new home. Before starting the hunt for your dream house, it’s a good idea to get pre-qualified. The pre-qualification process looks at your income to debt-ratio to determine if you qualify for a loan and how much the mortgage lender might be willing to lend you. Without being pre-qualified for a mortgage loan, you might find a house you love only to discover you can’t afford it. To avoid disappointment and show your realtor you are a serious homebuyer make sure you get pre-qualified for a mortgage before starting the house hunt.
The next step in the loan application process is a mortgage pre-approval. A pre-approval is more secure than a pre-qualification letter because for a pre-approval, the mortgage lender checks and verifies the applicant’s income, liabilities and assets. The lender usually also gets a credit report to find out the applicant’s credit history and credit worthiness. A mortgage pre-approval shows if the applicant is likely to be approved for a mortgage and for how much.
Once you have completed the mortgage loan application, you will receive all the required application disclosures such as: a Good Faith Estimate and an “Intent to Proceed” notice.
What to expect at closing
Being approved for a mortgage loan is not the final step in the home buying process. The most important part of the transaction is usually the closing. This is the most critical part of the lending process because a lender can still pull out at the last minute if the buyer’s circumstances have changed since the initial application.
Many things can happen that can effect a successful closing. These include: the buyer not having enough money to pay for the closing costs, the seller not taking care of any liens on the property, or a lender cancelling the loan at the last minute because the applicant no longer qualified for the loan due to opening a new credit account, racking up credit on current credit cards or changing jobs.
Just before closing, the lender will do a credit check to see if the borrower made any big charges on his or her current credit cards or to see if balances increased significantly. Therefore it always better to be safe than sorry and make sure your final credit report matches the one taken at the original loan application. Otherwise the mortgage could be subject to a complete re-underwrite or worse a loan application denial.
Finally, buyers should also have a final walk through the property before closing to ensure that there are no damages. This is the only time you will be able to negotiate any necessary repairs with the seller so it don’t skip this step.
Aurora, a leading financial services company, has funded billions of dollars in loans across the United States and serves clients nationwide in more than 18 states and jurisdictions. A Direct DE FHA Lender, Aurora provides a broad range of financial products and services, including consumer banking and credit, corporate and investment banking. For more information on Aurora Financial, visit www.auroraf.com or call 1-(877) 887-1117.