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Courtney Christensen
Getting a home loan is particularly daunting, particularly for those who are buying their first home or those who haven’t bought a home in decades.
For most of us, jumping into the loan process without first preparing for it, is a mistake. So, when you are thinking about getting a mortgage, be sure to ask these five questions.
How do I start the process?
It is possible to apply for a mortgage after you’ve put in an offer for a house, however, we don’t recommend it. The best way to start the mortgage process is before you begin seriously shopping for homes. This is because a pre-approval will help make your shopping experience much better.
A pre-approval means you’ll get a very close estimate of what you can afford. You will then be able to look at homes within your budget – ones you can realistically purchase. You can get started on a pre-approval through Ruoff’s online application (on your phone or your computer).
What loan program is best for me?
There are several loan programs available to borrowers, and each one requires something a little different. You may be eligible for multiple loan options, so it’s best to do your research on the options and discuss with your loan officer.
The right loan program for you depends on several factors: your current financial situation, your debt to income ratio, your credit score, how you expect your finances to change, the area your chosen home is located in, the price of the home, etc. Your loan officer will be happy to educate you on your options and will be with you ever step of the decision making process.
What are my down payment options when purchasing a home?
Fortunately, there are many, many options available to you in regards to down payments. A down payment is an upfront cost to purchasing a home – the more you put down, the lower your monthly payment will be.
For conventional mortgages, the traditional down payment is 20% of the home price. However, you may be eligible to put down 10%, 3.5%, or even 0% depending on the loan program you choose. For instance, a USDA loan does not require a down payment. Plus, many states have down payment assistance programs designed to help buyers. These programs may offer a percentage of your down payment or a credit that can be applied to your taxes.
What documents will I need to provide?
When applying for a pre-approval or a mortgage, there are several documents that are necessary in determining your eligibility to different loan types. These are:
- Driver’s license or other state issued photo ID
- Last two years of tax returns and employer W2’s
- Pay stubs covering the most recent 30 days
- Two consecutive months of complete bank statements
- Contact information of your Homeowners Insurance Agent
These are the documents that are required for all loan types. However, you may be asked to provide other documents, as well. Once your documents are sent to the underwriter for approval, there may also be additional requirements that they need to meet the approval. For instance, if your credit report shows a limited credit history, you may be asked to provide proof of other regular monthly payments – called alternative lines of credit.
How can I get a better interest rate?
Interest rates are based on many factors including credit score, property type, and down payment. Pricing is unique to the person’s strength or weakness as a borrower. But, there are a couple of options for you to lower your interest rate.
The quickest way is to put more money down on your home. Not only will this lower your interest rate, but it will drastically lower your monthly payment as well. Secondly, you can look into a different loan program. Some offer better rates than others. If these aren’t an option for you, improving your credit score is another way to go. This takes some time, though, which means you may have to put off buying your home for 6 months to a year.
