Phyllis DiBlasi, GRI, CRS's Blog
While buying a home is a huge decision that should entail a lot of planning and preparation, applying for a mortgage can be surprisingly easy. Just like with other lenders and creditors, a mortgage lender will want to know that letting you borrow money will be a safe investment. Applying for a mortgage is all about ensuring just that.
In today’s post, we’re going to breakdown the home loan application process to help you have the best chances at a smooth and successful mortgage approval. We’ll also define some of the common terms used in mortgages that might leave you scratching your head so you have a better idea of what your options are.
Prequalification and Preapproval
Getting prequalified and preapproved for a mortgaged can both be helpful steps toward securing your home loan. The two terms mean two entirely different things, however.
In order to be prequalified for a mortgage, you typically need to only fill out a simple form (sometimes directly through a lender’s website). On this form, you won’t need to provide specifics or official documents.
Why is this process so simple? Well, that’s because getting prequalified for a loan doesn’t ensure that you’ll actually receive one. Rather, it is simply the first step toward finding out what type of mortgage and interest rates you could receive.
The next step after prequalification is preapproval. To get preapproved, you’ll have to fill out an official mortgage application. Your lender of choice will request a few pieces of information from you, including tax returns, proof of employment for the last two years, and a list of your debts. The lender will also perform a credit check to determine your loan eligibility.
At this phase, lenders will also run your credit report. This is a type of “hard credit inquiry” that details your payment history, the number of accounts you have open, and other factors that help make up your credit score.
To secure the lowest interest rate possible, it helps to have a high credit score. So, in the years and months leading up to your mortgage application, focusing on building credit will pay off.
To increase your credit score, you’ll need to focus on paying your bills on time each month. You should also avoid opening new accounts within a few months of applying for a mortgage because this will count as a new credit inquiry. New credit inquiries--including applying for a mortgage--lower your score temporarily, so it’s best to avoid them when possible.
Additional paperwork required for mortgage applications
Not every mortgage application will be the same. Depending on the type of income you receive, you may need to provide different forms of income verification.
Each person will also have to claim different debts and assets. When buying a home with a spouse or partner, it’s important to consider your debts, assets, and credit scores to determine if it’s better to apply jointly or separately.
You may see homes listed as in a search for a home that are denoted as a “Homepath property.” You may wonder what this means and if you’re even eligible to buy the property. It is a specialized program, so you’ll want to be informed on what it means to use it and what the process is.
Fannie Mae Programs
What was formerly known as a Homepath property is now known as The Home Ready Mortgage by Fannie Mae. With the Homepath program, people are able to find and purchase homes with a bit more ease and less financial risk. If you’re buying your first home, this could be the perfect way to get it. This program offers a list of foreclosed properties with really good deals on them. Repeat buyers can also find some great deals through this program, so it has something for everyone. It has so many benefits for anyone who is looking to buy a home.
How To Get A Homepath Property
Fanie Mae does require that you place a bid through a realtor. The program is designed for buyers to better understand the risks with buying foreclosed homes, while giving them a better opportunity to purchase a foreclosed home. Since foreclosed homes are sold as-is, there’s a risk that the home actually has some serious damage that needs to be repaired at a high cost. This is where a realtor comes in, as they can help buyers to understand ho much work a property may need and the exact risks involved.
Low Down Payment
Even if a home through the Homepath program requires extensive repairs, it’s not an opportunity that you should should shoot down right away. Unlike traditional mortgages where you’ll typically need 20% down to purchase, Fannie Mae only requires that buyers place as little as 3% down. This means that with the low cost of the available homes and the small down payment required, buyers can save thousands of dollars in total. Of course, this savings can help buyers to make the required repairs to the home.
There’s not many stringent requirements to be eligible to buy a Homepath property. Most people actually can be found to be eligible for these purchases. The biggest requirement is that before buyers reach the closing table, they’ll need to take an education course. This allows buyers to get assistance with the closing costs.
Learn More About Homepath
If you’re looking to buy a home at a low cost, you should definitely talk to your realtor about the Homepath program. They can also explain more about specific eligibility requirements. It’s easy to make use of this program, so start saving right now and search for a Homepath property.
You’ve closed on your new house, moved all your boxes, and started planning how to arrange your furniture. Your family can’t wait to settle in and regain a sense of normalcy after the chaos of moving. But before you get back to your normal routine be sure to add these tasks for new homeowners to your to do list. Each takes just an hour of your time and will help you to stay on top of maintenance as well as familiarize yourself with your new domain.
Start by finding out where your main water shutoff valve is located. This is not something you want to have to find when you are in an emergency. In colder climates, it’s most likely to be found in your basement and if you are in a warmer climate you should find it outside. If you keep a binder for home updates add a note of the location within.
Make sure your attic insulation is the correct depth. You want at least 6 inches and even more in northern states. Ensuring that your insulation is the correct depth will help you to save money throughout the year on heating and cooling costs. If you’re attic doesn’t have the correct depth or is damaged be sure to have it replaced as soon as possible. Oftentimes you can get incentives for improving your insulation and thus creating a more energy efficient home.
Check the temperature of your hot water heater and be sure it is set at 120 degrees tops. If you have an older model add a hot water heater blanket to help retain heat. If you find that your heater leaks you want to replace it immediately. A small leak can quickly lead to a major one, flood your home and cause serious damage. Again, be sure to keep note of the month and year you replaced your heater or which year your current model is.
Replace air filters right away so that you will know when they’ve last been replaced. Add monthly reminders to your calendar to stay on top of this quick maintenance task. You can make this task even easier by buying them in bulk. If you love to be organized label them for each month so you know exactly when you’ll next need to replace them.
Change all of the locks on your home. This is simple enough to do on your own and is an easy proactive safety measure for your family. While one hopes there are no lingering keys out in the world of your home, you can’t be sure of who may have a spare key.
Take note of any cracks in your basement. If you find any mark their length with a piece of masking tape and mark with the current date. Watch closely to see if the crack spreads beyond the mark. If you find that the cracks are lengthening be sure to get them taken care of by a professional. This is a serious repair you don’t want to wait on.
Buying a new home is an exciting time. Especially after you’ve closed on the house, can begin to move in and start settling into your routine. Before you get too comfortable be sure to add a few tasks to your to do list. Familiarizing yourself with your new home right away will help you stay on top of maintenance and have peace of mind.