5. First Steps to Getting a Home Loan
Q: What steps need to be taken to secure a loan?
Even before you apply for a home loan, it is helpful to find out what rates and programs are available to you.
Lender Rate Match Tip: The only place to shop online without sales pressure from a loan officer is Lender Rate Match.
After you determine what loan you want, the next step will be to complete a loan application. To do so, you'll need the following information:
- Pay stubs for the past 2-3 months
- W-2 forms for the past 2 years
- Information on long-term debts
- Recent bank statements
- Tax returns for the past 2 years
- Proof of any other income
- Address and description of the property you wish to buy
- Sales contract
- During the application process, the lender will order a report on your credit history and a professional appraisal of the property you want to purchase. The mortgage loan process typically takes between 1-6 weeks.
Q: How are pre-qualifying and pre-approval different?
Pre-qualification is an informal way to see how much you maybe able to borrow. You can be 'pre-qualified' over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house.
Lender Rate Match Tip: Use Lender Rate Match to help you understand how much you can afford to borrow, and what your monthly payment will be. You can also request to be contacted by a lender who can pre-approve your application.
Pre-approval is a lender's actual commitment to lend to you. It involves assembling the financial records mentioned above (without the property description and sales contract) and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.
Q: How can I find out information about my credit history?
There are three major credit reporting companies: Equifax, Experian, and Trans Union. Under federal law, you can get a free copy of your credit report through AnnualCreditReport.com once a year.
Lender Rate Match Tip: We strongly recommend you obtain your three credit reports along with three FICO scores before applying for a loan. The only source to order your three-bureau FICO scores is
myFICO.com.
It is very helpful to arm yourself with the information lenders will see. Ordering your credit reports and scores through myFICO does not affect your credit score.
Once you receive your credit reports, it's important to verify their accuracy. Double check the "high credit limit," 'total loan," and 'past due" columns. It's a good idea to get copies from all three companies to assure there are no mistakes since any of the three could be providing a report to your lender.
Q: What if I find a mistake in my credit history?
Simple mistakes are easily corrected by using the online dispute process provided when you order your report. You can also dispute mistakes in writing. Keep copies of all your disputes in case you need to follow up later.
Lender Rate Match Tip: If you need a mortgage within the next sixty days, read our article,
How to Quickly Fix Your Credit to Get the Best Mortgage Loan.
Q: What is a credit bureau score and how do lenders use them?
A credit score is a number, based upon your credit history that represents the possibility that you will be unable to repay a loan. Lenders use it to determine your ability to qualify for a mortgage loan. The better the score, the better your chances are of getting a loan.
FICO scores go as high as 850, though few people have that score. In general, scores in the mid to high 700s will enable you to qualify for the best rates. Most lenders will use the middle of your three credit scores to determine which loan program you qualify for. So if your credit scores are 650, 680 and 700, the middle score ? 680 ? will be the one used to qualify you for a particular program.
Q: How can I improve my score?
Read our article, Improve Your Credit to Get the Best Mortgage Rate, for tips.
Start searching and find the
lowest mortgage rate now.