The process to apply for a home loan is now easier than ever before, with a number of lenders offering online loans and digital application facilities. However, it’s still important to know how to go about the process so you can choose the right mortgage loan option. Here’s a quick five-step guide to the process.
Gather Your Documents
Before you start looking for a home loan, it’s a good idea to gather all the documents you will need during the application process. Most lenders will require you to submit things like your address history, bank statements, 401(k) statements, pay stubs, W-2s, etc.
Check Your Credit Score
Although you can get approved for a home loan with a credit score as low as 500 (with a higher down payment), you’ll be able to snag a much more competitive interest rate if you have a credit score of 740 or higher. So, before you submit your home loan application, check your credit score.
Research Different Mortgage Options
It’s important to pick the right type of mortgage option to increase your chances of getting the loan and lowering the overall cost of the loan. There are many home loan options that you could consider, including a 15-year fixed loan, a 30-year fixed loan, a conventional loan, an FHA loan, a VA loan, a USDA loan, etc. Further, there are also different types of financial institutions that offer these loans. For instance, you could get a home loan from a brick-and-mortar bank, a credit union, or an online lender. So, review your mortgage loan options and pick the one that makes the most sense to you.
Consider how Much You Are Willing to Pay on A Monthly Basis
Once you find a few loans that seem like they have decent terms, you’ll need to apply for pre-approval. Doing this will tell you how much you can borrow and how much you’ll need to pay as interest. But, keep in mind that the loan offer you get when you do this only indicates the upper loan limit. It’s important to consider how much you can afford to pay on a monthly basis and pick the loan amount accordingly.
Complete the Application
Once you’ve completed the above-mentioned steps, the remainder of the process is likely to be relatively easy. All you’ll need to do is submit any paperwork that’s required by the lender. If the lender has any queries or needs to schedule a home inspection, they will get in touch with you.