In this guide, we will cover understanding the homebuyer and mortgage process. Buying a home to live in is one of the most meaningful investments a person can make in their lifetime. For most people, purchasing a home involves taking out a mortgage or home loan. Marga Jurilla, the National Operations Manager at Gustan Cho Associates, shares the following about the mortgage loan process:
The mortgage process can be overwhelming and confusing, especially for first-time homebuyers. This comprehensive guide will demystify the mortgage process and explain how to obtain a mortgage to finance your home. There is no reason why any borrower should have stress during the mortgage process.
Purchasing a home is a significant financial commitment for many people. It is one of the most important investments they will make. As a result, it is crucial to understand the mortgage process to ensure that you are making informed decisions. Purchasing a home is a significant financial responsibility for most people.
First-Time Homebuyers: How Can I Become a Homeowner
You do not need a large down payment, great credit, and high credit scores to buy a house. The key is to get qualified and pre-approved. Outstanding collection accounts and charge-offs do not have to be paid to qualify for a mortgage. Once pre-approved for a home loan mortgage, you can start looking for your dream home.
Homebuyers with a prior bankruptcy and foreclosure are eligible for a mortgage. You do not need to pay outstanding bad credit. The key is to have timely payments in the past 12 months to be eligible to qualify and get pre-approved for a mortgage.
Working with and choosing an experienced real estate agent who understands your needs and the local market is essential. When you locate a home you’re interested in, you’ll make an offer and negotiate with the seller. If the request is accepted, you’ll move on to giving the executed offer to your Loan Officer and closing on the home. We will highlight the steps below and look further into the various stages later in the article.
What is a Mortgage?
A mortgage is a loan to finance residential or commercial real estate. The lender provides funds to the borrower to buy or refinance the property. The borrower agrees to repay the loan over a set period with interest. Residential mortgage loans are amortized over 15 to 30 years.
A mortgage can range from 15 to 30 years, depending on the borrower’s preference and the lender’s terms. Commercial loans are balloon or adjustable rate mortgages amortized over 5 to 30 years.
Once you have determined you need a budget, choose a lender. You can work with a mortgage broker or a lender. A mortgage broker works with multiple lenders to help you find the best mortgage rate and terms. A direct lender only offers its mortgage products.
The Mortgage Process
The first step in the home mortgage process is determining how much you can afford. Your income, credit score, and other financial obligations, such as debt and monthly expenses, are considered. It is essential to be realistic about your budget and not overextend yourself. The mortgage process has several stages.
Obtaining a mortgage can seem daunting, but it can be a smooth process with the correct information and guidance. Start by getting pre-approved for a mortgage and work with a reputable lender who can guide you through the process and help you make informed decisions about the type of mortgage that best fits your needs.
Remember, a mortgage is a long-term commitment, so take the time to understand the process and choose the right loan. After you submit your mortgage application, the lender will conduct an underwriting process to evaluate your creditworthiness.
Steps of The Mortgage Process
Getting pre-approved for a mortgage is essential before searching for a home. Pre-approval means that a lender has reviewed your credit, income, and assets and has determined that you are eligible for a specific loan amount. Once pre-approved, you can look for homes within your budget. John Strange explains the mortgage process:
The lender will look at your credit score, employment history, and debt-to-income ratio to decide whether you’re a good candidate for the loan. If everything checks out, you’ll receive a mortgage commitment letter.
Before looking for a home, you should get pre-approved for a mortgage. Getting pre-approved involves submitting a mortgage application and documenting your income, assets, and debts. Pre-approval helps determine how much you can afford and strengthens your offer when you find a home you want to buy.
The Importance of The Pre-Approval Letter
After you’ve found a home you like, you’ll need to complete a mortgage application. Alex Carlucci of Gustan Cho Associates explains the number one reason for last-minute mortgage loan denials as follows:
The qualification and pre-approval stage is the most important mortgage process. The number one reason for a last-minute mortgage loan denial is due to the loan officer issuing a pre-approval when the borrower was not qualified.
The application will require detailed information about your income, assets, and debts. The lender will review your application and verify your employment, income, and credit history. They will also order an appraisal to ensure the home’s value sufficiently covers the loan. Approval: If the lender approves your application, they will issue a formal mortgage commitment letter. The final step is the closing, where you will sign all the necessary paperwork, pay closing costs, and the lender will fund the loan.
How Much House Can You Afford vs. Qualify
Before you start looking at homes, you need to determine your budget. The budget involves calculating your monthly expenses, including housing costs, and figuring out how much you can afford to spend on a mortgage payment each month.
A jumbo loan is a loan that exceeds the standard loan limits set by Fannie Mae and Freddie Mac.
It would be best to consider your down payment and closing costs when determining your budget. Your lender can help you determine your budget. Various types of mortgages are available, each with its pros and cons. In this section, we will cover the common types of mortgages:
Fixed-rate Versus Adjustable Rate Mortgages
Go over what type of loan term is best for you. ARMs can have lower rates. Adjustable rate mortgages can have a low rate period, but when rates can adjust to a higher rate when the initial rate period ends.
Adjustable rate mortgages can benefit first-time homebuyers buying a starter home. ARMs have a lower start rate for a certain period of time but can adjust when rates adjusts.
A fixed-rate mortgage has a fixed interest rate and monthly payment for the life of the loan. An ARM has a variable interest rate that changes periodically based on market conditions.
Government Vs. Conforming Loans
There are two types of traditional loans: Government-backed loans and conforming loans. The three government-backed loans are FHA, VA, and USDA loans. Conventional loans are often referred to as conforming loans because they need to conform to Fannie Mae and Freddie Mac guidelines. Conforming loans are not backed by any government agency. Dale Elenteny of Gustan Cho Associates explains government versus conforming loans::
Government-backed loans are for owner-occupant borrowers only. You cannot finance a second home or investment property with a government-backed loan. You can finance second and investment homes with conventional and non-QM loans.
An FHA loan is a government-backed loan with more lenient credit and down payment requirements. Borrowers with credit scores down to 500 are eligible for FHA loans. VA loans are for veterans and active-duty military members with no down payment requirement. USDA loans do not require a down payment but have an income cap. USDA loans are only eligible only designated rural by USDA Rural Development.
Non-Conforming Loans
Non-QM and jumbo loans are non-conforming loans. There are no particular guidelines on non-conforming loans. Mortgage guidelines on non-conforming and non-QM loans are set by the individual mortgage lender. Hard money and non-QM loans offer investment property financing with no required income docs.
Gustan Cho Associates has a national reputation for being a one-stop mortgage shop. Residential, commercial, hard money, person loans is offered through Lending Network, LLC.
Gustan Cho Associates has a lending partnership with Lending Network, LLC. Lending Network, LLC is the nation’s premier and fastest-growing lender for commercial loans. We highly suggest you check Lending Network, LLC for every loan program available today.
Why Choose Gustan Cho Associates
Not all lenders have the same lending guidelines on government and conventional loans. Not all lenders offer the same loan programs. Gustan Cho Associates has a national reputation for being a one-stop shop.
Over 80% of the borrowers at Gustan Cho Associates are folks who got a last-minute loan denial or could not qualify at other lenders. We are nationally recognized as a one-stop mortgage lender. Any loan program in today’s marketplace is offered at GCA Mortgage Group, LLC.
If you have any questions about the content in this blog or need to qualify and get approved for a mortgage, please call or text Ronda Butts at 407-460-7999 or email at ronda@gustancho.com for more information and further assistance. Ronda is an experienced, dually licensed real estate agent and mortgage originator.
How Long Is The Homebuying and Mortgage Process
The overall timeline of the mortgage process is 30 days from the date the borrower gets the loan estimate disclosed. The final step in the mortgage home loan process is closing your loan. Closing is where you sign all the paperwork and finalize the loan. You must bring a cashier’s check for the down payment and closing costs.
The mortgage process should not be stressful. Mortgage loans should not take longer than 30 days unless there are special circumstances. As long as borrowers fully cooperate with the mortgage process in getting documents required promptly, the mortgage process should be smooth and close on time.
The lender will review your financial information to ensure everything has stayed the same since your pre-approval. You will usually close at a title company or an attorney’s office, where you sign all the necessary paperwork and officially take ownership of your new home. Closing costs typically include fees for the lender, appraisal, title search, and other expenses associated with the purchase.
Do All Lenders Have the Same Lending Requirements?
If you should decide to buy, before you begin looking for a home and during the process, we have vast experience working with buyers to get them ready to purchase their dream home. We can take you through the entire financing process for your home loan. We also can connect you to title companies/attorneys and real estate agents in your area that can help as needed.
Gustan Cho Associates are mortgage lenders licensed in 48 states, including Washington, DC, Puerto Rico, and the U.S. Virgin Islands. Over 80% of our borrowers are folks who could not qualify at other mortgage companies due to it lender overlays, or because the lender did not have the loan program best suited for them.
Ronda has successfully guided many homeowners through obtaining a home on both the lending and real estate side. She does not represent buyers or sellers but offers free consultation in 48 states at Gustan Cho Associates by connecting homeowners, buyers, and sellers to the needed sources.
