Getting Started Buying
Before you apply for a mortgage, you need to know your: Current monthly income; Current monthly expenditure; Desired monthly mortgage payment; Anticipated sale price or home value; Anticipated down payment amount. This information makes it much easier to figure out how much you can borrow and how much house you can afford.
Obtaining a Loan
Whether you are seeking pre-approval or have agreed on a purchase price for your new home, you need to “prove” your eligibility for a mortgage. The Financial Institution will consider the following factors in determining your borrowing eligibility:
You typically need to prove both your monthly income and income-earning history.
Both your current and projected monthly obligations are compared to your monthly income. As a general rule, your monthly housing expenses should not exceed 28% of your gross (pre-tax) monthly income.
Overall, your total monthly expenses (e.g. housing, auto, student loans, credit card, etc.) should not exceed 36% of your gross monthly income. It is important to note that these are general guidelines and can vary depending on the loan program you select.
A demonstrated track record of handling financial obligations in a timely manner is a characteristic most financial institutions seek. The Financial Institution uses your credit report to access and qualify this track record by clearly understanding your financial history they can judge the likelihood that you will also handle your mortgage obligation responsibly.
Down Payment Size
Although some loan programs only require a small or no down payment, a larger down payment can be considered favorable. Often, the size of your down payment can be increased through a gift from an immediate family member or by borrowing against another (such as a fixed deposit or life insurance).
The following income and employment information is generally required as part of the loan process:
For the employed:
A Current pay slip showing year-to-date income
For the self-employed:
A Current, signed business and personal income tax returns covering a two-year period
A Current balance sheet
Year-to-date profit and loss statement
Bank account information
- Account statements spanning the most recent two-month period (all pages).
- Investment information, which should show the current value of your account and statements spanning a two months period.
- Credit card information-Including credit card company names, monthly payment amounts, and outstanding balances.
- Other loans (auto, student, etc.) information-Including lending company names, account numbers, monthly payment amounts, and number of remaining payments.
- Rental information (if applicable)-Landlord’s name, address, and telephone number.
- Name of settlement agent/attorney, firm’s name and telephone number;
- Divorce decrees and separation/alimony agreements (if applicable);
- List of other real estate owned, including value, mortgage balance, monthly payment.
Secure Your Rate
When applying for a mortgage for your home, you’ll have to make a decision about the interest rate option best suited for you. Make sure you clearly understand the choices below so you can make an informed decision.
There are several steps involved in approving your loan. The Financial Institution will take care of the following:
- Ordering a home appraisal
- Ordering your credit report
- Requesting any missing information necessary to complete your application
- Keep you continually updated
- Promptly contact you with your loan decision
When all the I’s are dotted and the T’s are crossed, and the house is ready to change hands, you can breathe easily and think about moving into your new home. At this stage in the mortgage process, the realtors and Financial Institution work together to close, or settle, the deal. At the closing will be you, Your settlement agent/attorney and the vendor (home seller).
In preparation for this meeting, you’ll need to provide the following information: Your desired closing time and date; Your settlement agent/attorney’s name, address, and telephone number; A certified or cashier’s check as payment for your closing costs.
The other closing participants will provide the following information: Loan closing documentation-provided to the settlement agent/attorney by the Financial Institution; Title search and notification of final closing costs-provided to you by the settlement agent/attorney.
Making arrangements to keep the financial commitments you made in buying the house can be a challenge. After closing, your loan officer should provide you with the following:
Monthly statements throughout the life of your loan; The option of setting up an automatic payment plan after your first payment; Property tax and insurance matters.
If You Are Not Yet Ready To Buy, here are a few hints that can help you increase your future purchasing power:
- Focus on saving money. One of the easiest ways to accomplish this is by developing and adhering to a strict budget.
- Repair your credit.
Consistency is the key. Make sure your bills are consistently paid on time. Manage debt. Refrain from accumulating additional debt while simultaneously paying off or down existing debt. Look for interest rate reductions. Your purchasing power increases as interest rates decrease.