How to Apply for a Mortgage

3. Determine the loan term that’s right for you

When you borrow money to buy a home, you can usually choose to pay it back over 30, 20, or 15 years. Some lenders also offer other mortgage repayment terms (for example, you could get a 10-year mortgage).

If you can afford a higher monthly payment, it might be beneficial to get a shorter term loan, as this will usually result in a lower interest rate on your mortgage. You can also see if an adjustable rate mortgage makes sense based on rates and your plans for staying in your home. With a variable rate mortgage, you’re only guaranteed your initial interest rate for a set period of time, after which it can go up or down – so there’s a risk in going this route.

4. Gather your papers

When you apply for a mortgage, you must provide your lender with specific information about your income and assets. Before applying, gather the following documents:

  • Your last tax return
  • Two months of payslips
  • Two months of bank statements
  • A letter from your employer confirming that you are an employee in good standing

These are all things your lender will likely need to determine if you’re approved for a mortgage.

5. Apply to different lenders

Different mortgage lenders set their own rates based on the factors mentioned above: credit score, debt-to-equity ratio, income, and funds available for a down payment. That’s why it’s a good idea to complete more than one mortgage application. The more offers you get, the easier it will be to compare your choices and walk away with the best home loan offer.

That said, it’s a good idea to shop around for a mortgage within the same 14 day period. Each time a lender pulls your credit report, it counts as a serious inquiry on your file. Too many difficult applications could hurt your credit score, but if you apply for multiple mortgages within 14 days, all of those applications will count as one application.

6. Select the right offer

Once you’ve completed those mortgage applications and heard from the lenders, you’ll need to decide which lender to work with. When comparing your choices, don’t just automatically opt for the lender with the lowest interest rate. Also pay attention to closing costs. Closing costs are the fees you’ll pay to finalize a home loan, and they can vary by lender. One lender may offer a lower interest rate on your mortgage, but a much higher closing cost than another.

7. Stay in contact with your lender and respond if necessary

Once you decide to accept a mortgage offer, closing that loan can take weeks. This is because your lender will need to process your application and verify your financial information through a process called underwriting. Be sure to stay in touch with your lender to make sure things are moving forward and be prepared to provide additional documentation as needed. If you are self-employed, for example, you may need to take additional steps to provide proof of income. See our guide to self-employed mortgages for more information on this.

8. Secure home insurance

Mortgage lenders generally require proof of home insurance to secure your loan. Just as it’s important to shop around for a home loan, it’s also a good idea to shop around for insurance to see what premium rates you qualify for.

9. Prepare your fence

Once your lender is ready to finalize your loan, you will receive a closing package filled with loan documents. Be sure to review this information carefully, as it will specify the terms of your loan and outline the payments and costs for which you will be responsible. You’ll also need to decide whether to roll your closing costs into your mortgage or pay them up front. Usually, you will have the flexibility to repay these fees over time rather than having to bring additional cash to your close. Once everything is settled, you are ready to close. You will sign a heavy stack of documents and your mortgage will be in place.

Getting a mortgage can be a daunting prospect, but it doesn’t have to be. The key is knowing what to expect and being patient, as the process can take time. If you’re applying for your first mortgage, check out this list of the best mortgage lenders for first-time home buyers. Working with the right lenders could make the process smoother.

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