Very few people have enough money to buy their home with cash. Most people will need to get a loan. Getting pre-approved for a loan is the first step in the home buying process and really needs to be done before you start looking at homes. This does not take very long and if you don’t have a lender, you can click on “My Favorite Companies” on my website to find some great mortgage experts who can help. Buying a home is a multifaceted process with many moving parts. I strive to guide my clients from the first steps of buying a home all the way to closing and to continue to be a resource to them far into the future. I want to be able to walk my clients through this process with as few bumps in the road as possible. A qualified Realtor like myself will inform their clients that being pre-approved is one of the first steps in looking to purchase a home.
What Is A Mortgage Pre-Approval?
Let’s start at the beginning and understand what a mortgage pre-approval is and what this means for you and your family. A mortgage pre-approval isn’t a promise that you’ll get a loan for the home you are wanting to purchase. This simply means a loan officer has looked at your finances, debt, assets, and credit history, obtained approval from one of the major lenders (ie Fannie Mae/Freddie Mac), and determined how much money they are willing to let you borrow. This will also give you your interest rate and an estimate of the amount of your monthly mortgage payment would be. Even though a pre-approval doesn’t guarantee you’ll get a mortgage, there are many reasons you need one to purchase a home. First, it gives you an idea of what you can afford to buy so you don’t waste time looking at homes above your price point. Second, a Seller will most often require you to have a pre-approval before accepting your offer. It also helps expedite the closing process because your information is already in the lender’s system. Keep in mind that pre-approvals do have an expiration date. Pre Approvals are good for 60-90 days depending on the lender. If it expires, you will need to work with your lender to get them the documentation they need.
What Do You Need to Get a Loan?
Although every lender or mortgage broker is different in what they require, this list gives you an idea of what they will need from you. Hopefully, this helps you prepare for getting your pre-approval done quickly. If you own your own business, you might need more documents:
- Driver’s License
- Social Security card or number
- If you aren’t a U.S citizen a copy of your green card
- Credit History – Check your credit score
- Employment verification 2 Years Minimum
- Recent pay stubs covering the last 30 days
- W-2 forms from the last two years
- Proof of any additional income
- Last two years of personal federal income tax returns Sometimes optional
- Last 60 Days of Bank statements for proof you can cover down payments and closing costs
- Last 60 Days of Any statements for 401K, IRA, stock accounts, or mutual funds, sometimes your assets can be used to supplement your income.
The Types Of Home Loans
Let’s go over a few things you should know about your loan and the options that you have. The principle component is the amount you borrow, and the interest is what you pay to borrow the money. There are different types of loans that give you options on how to structure your interest payments to help you meet your financial needs. They will give you the option between a fixed-rate mortgage or an adjustable-rate mortgage.
Main Features of a fixed-rate mortgage
- The unchanging interest rate on the loan
- Monthly mortgage payment will always be the same amount
Main features of an adjustable-rate mortgage
- The initial interest rate will be lower than the rate on a fixed-rate loan
- Interest rate adjusts periodically after the initial term expires, this can happen anywhere between 1 to 10 years
- Monthly mortgage payment could increase or decrease based on annual adjustments to the interest rate
Deciding between what type of loan is best for you is a personal decision. You should take your time and look at both options and decide which is best for you. If you decide to go with the adjustable-rate mortgage I would recommend asking what future monthly payments would be if the rate increased, just so you are prepared!
Once you have decided on the type of home loan that works best for you, your lender will help you decide the term or the number of years you will make the payment on your home loan. The longer the term the lower your monthly payment will be. Keep in mind with a longer-term, you will also pay more in interest over the life of the loan. Interest rates have been very low for the last few years but are now predicted to rise over the next year. If you are in the market to buy now, I would suggest doing so before they go up any further! If you have decided to go with a fixed interest rate this rate will never change on your 15 or 30-year home loan. Unfortunately, there are fewer homes on the market now than usual, so demand is very high. If you want to take advantage of the low mortgage rates, I recommend you get in touch quickly so you can get started looking for a home.
Final Thoughts How Can I Help
If you want more information on getting pre-approved and the process of getting a loan, contact me. I work with some amazing mortgage brokers and lenders and would be happy to connect with you. In fact, I have a few mortgage experts listed on my webpage that my clients have used and loved. If you are planning on buying or selling a home in the near future and you think that my expertise and full-service approach might be of service to you, don’t hesitate to reach out and contact me!
If you would like more information on the Boulder area or the real estate market specifically, reach out to me today or click on my website for more information www.elisabethnelsonrealestate.com
Luxury Home Specialist & New Home Specialist
Coldwell Banker Realty
(303) 916 5859