Before you start looking for a house with a real estate agent, it’s a good idea to check your mortgage eligibility with a loan officer first. Once you know which type of mortgage suits your finances best, you should learn how to get that mortgage. A great first step is to meet with a loan officer for a mortgage prequalification. Being well-prepared for this meeting will make the process smoother and allow you to focus on finding a home.
Mortgage lenders need a lot of paperwork for approval, so giving them as much as you can upfront will help prevent delays later on. Find out what documents your loan officer requires, get them ready in advance, and you’ll have an easier time getting your mortgage closed.
To better understand the mortgage pre-approval process, here are some steps that will help you get ahead in house hunting.
**CONSIDERING FINANCES**
It’s important to have some savings set aside for the down payment on your home. Check how much you have saved up for this purpose but be cautious not to use all your savings as you’ll need money for other expenses too.
Moving to a new home will cost you money, even if you’re not hiring professional movers. When you move in, you’ll likely need things from the hardware store and might have to do minor repairs or improvements to make the new place comfortable. These expenses can add up quickly, so it’s wise to keep some funds aside for unexpected costs.
**HOW MUCH CAN YOU SPEND COMFORTABLY?**
Before your meeting with the loan officer, it’s important to know how much you’re comfortable spending on a mortgage. Even if the loan officer says you qualify for more than you expected, stick to your budget if a larger mortgage payment doesn’t feel right. Remember, mortgage payments cover more than just the loan principal and interest; they also include mortgage insurance, homeowner’s insurance, and property taxes. Sticking to your budget will help you avoid financial stress later.
The mortgage term, or the number of years to pay off the mortgage, greatly affects your payment amount. Traditional mortgages commonly range from 10 to 30 years, with 30 years being most common. Think about which term suits your budget best. For example, a 10-year mortgage will have higher payments than a 20-year one, but if you qualify for less than your prequalification amount, you might manage higher payments by choosing a shorter term.
**DON’T NEGLECT CLOSING COSTS**
Besides your down payment, don’t forget about the closing costs that come with getting a mortgage. These costs, along with the funds needed for your escrow account, can add a few thousand dollars to your loan.
Closing costs cover all fees related to getting a mortgage, such as charges from the title company, appraiser, lender, and taxes. These fees can add up fast, usually about 4-5% of the purchase price.
**WHAT YOU NEED FOR YOUR APPOINTMENT**
To keep your loan application process smooth, bring the following documents to your meeting:
– Paystubs (two months’ worth, if you’re a W2 employee or get paid on commission).
– W2s (from the last two years, along with employment start and end dates for the past couple of years).
– Bank statements (from the last two months).
– Tax returns (from the last two years).
– Documents for retirement, disability, or social security income (if applicable).
– Photo ID for verification.
Providing all the necessary documentation early will make the approval process smoother. After reviewing your financial situation and credit report, your loan officer can issue a prequalification letter. This letter states how much you can borrow, showing realtors you’re ready to view homes—many experienced realtors won’t show homes without one. When you make an offer on a home, presenting this letter shows sellers you’re serious, which is helpful, especially in competitive situations. Being preapproved even before finding a house gives you an advantage over other potential buyers.