Owning your own home is a dream come true for most people. However getting to the stage where that dream can become a reality generally takes a lot of hard work, stress, and financial concern. After finding the right property for you, one of the most important aspects of purchasing your own home is securing your home loan. Almost all first time buyers (unless they are independently wealthy or being giving substantial external financial support) will need to secure a mortgage in order to purchase their property. Getting a home loan generally involves lots of form filling, preparation, and an in-depth knowledge of your current financial position. Feel ready to take the plunge and purchase your own dream home? Here are the most important steps in getting a home loan so that you can purchase your dream property:
Be Financially Prepared
Before you seek pre-approval for your mortgage/home loan, it is important to ensure that your finances are as healthy as they can possibly be. This is something that is likely to take months or years of prior preparation, but no matter what state your finances are in right now, when you make the decision to purchase a property you should be prepared to identify any financial problems you might face, and anything that could be a potential roadblock to securing a mortgage. The most important things any lender will look for are that you have a good credit rating, a healthy income level, and a decent amount of savings in the bank (which will likely form a part of your security deposit). If you are unsure about your credit rating then you can secure a copy of your credit rating before you apply for your mortgage: forewarned is forearmed, and it is better to be aware of any potential problems with your application before you complete it, so that you can discuss this with your lender.
Choose the right lender
When it comes to finding the right lender for you, don’t just settle for the first lender you meet. Shop around, and meet with at least two to three different lenders or mortgage brokers. This is important for a variety of different reasons: firstly, shopping around is one of the best ways to ensure you are securing the most competitive rates, which could help to save you money in the long run. Working with a mortgage broker that you feel confident in and able to connect with is also important, in the same way as it is important to choose a realtor that you have confidence in, because this will immediately remove some of the stress of the home loan application process for you.
Calculate your total costs
Finally, there is no escaping the fact that buying your first property will be expensive. Don’t forget that, even with a mortgage secured and pre-approval in place, buying a new home requires money: you will need at least 5-20% of the cost of the property for your down payment, as well as additional costs that you should be prepared for. These costs can include the closing costs, as well as the escrows for taxes and insurance. Other upfront expenses that most homeowners have to find before they move into their new property are the costs of your home inspection and appraisal, and your first year’s premiums for your homeowner’s insurance are also required to be paid in advance too. Finally, associated costs such as the costs of removal and any additional fees need to be considered. It is only be assessing all of this information and having a comprehensive cost breakdown of what money you actually need to get into your new home from start to finish that you will be aware of what kind of property you can afford.
“Buying a home”, US Department of Housing and Urban Development, http://portal.hud.gov/hudportal/HUD?src=/topics/buying_a_home
“A guide to getting your first mortgage”, US News, http://money.usnews.com/money/personal-finance/articles/2014/10/24/a-guide-to-getting-your-first-mortgage
“10 steps to buying a home”, Discover, https://www.discover.com/home-loans/articles/10-steps-to-buying-a-home
“How to get pre-approved for a mortgage”, Fox Business, http://www.foxbusiness.com/features/2013/03/25/how-to-get-preapproved-for-mortgage.html
“Your home loan toolkit: A step by step guide”, Consumer Financial Protection Bureau, http://files.consumerfinance.gov/f/201503_cfpb_your-home-loan-toolkit-web.pdf