Nothing is more important to us at Premier Mortgage Resources Roseville than winning your trust. Our job is to carry out the mortgage loan process with expertise, professionalism and expediency so you can embrace the benefits and joy of homeownership.
Buying a home is huge milestone that requires a lot of moving parts. Perhaps the biggest and most complex component is the loan itself.
Here are some of the steps you can expect and plan for as you embark on this exciting path toward buying a home of your own.
How much can you borrow?
This is a fundamental question that will drive your home search and home budget. As one of the first steps for obtaining a loan, determining how much you can afford will answer a number of financial questions, such as the projected amount of your monthly mortgage bill.
If you decide to go the preapproval route, the lender will want to know about your income, credit, assets and financial liabilities. With this information, you can get preapproved for a loan and begin your home search in earnest. Just be prepared to supply the lender with all the pertinent paperwork.
Factors in lending decisions
Lending companies consider a number of factors before approving a loan.
Loan-to-value ratio represents the maximum amount of exposure (loan/principal amount) the lender will sign off on. Lenders will work with credit-worthy borrowers and support 100% of this ratio. As home prices continue to inch upward, this is refreshing news to all borrowers.
Another ratio of equal importance is the borrower’s debt-to-income ratio. Lenders will want your mortgage obligation to not exceed one-third of your gross monthly income. In short, the debt-to-income ratio speaks to the borrower’s income compared to their outstanding monthly debt. The lower the ratio, the better off the applicant will be when all other factors are considered.
Your FICO credit score will also weigh heavily on the lender’s decision. This quantified measure of your credit worthiness is based on mathematical models that will reflect your credit risk. The lower the risk, of course, the higher chances of getting loan approval.
Your past credit payments, debt, payment history, length of credit history and other metrics will go into your score. Even a credit inquiry can impact your credit score, so it’s important to be selective when applying for new lines of credit as you prepare to apply for a mortgage.
You’ll also need to provide employment and income details. If you’re self-employed, the path toward homeownership will require a little extra effort, but nothing that will be overwhelming.
You’ll also want to disclose the source of your down payment. Lenders will assume that you are prepared to offer a cash down payment to meet loan requirements and to pay for other fees as part of your application process. Applicants should be prepared with a down payment and will need to document the source, even if it originated with someone in their inner circle.
A loan program for you
Just like any product, home mortgages are not a one-size-fits-all resource.
You and your lending team will pick a loan type that makes sense for your unique situation and goals.
Generally, there are two types: fixed-rate and adjustable-rate mortgages. A fixed-rate setup has terms of 15 or 30 years and the interest rate stays unchanged despite what’s going on in the market. This is an excellent choice if you plan on living in the home for at least seven years. It’s for you if you prefer stable and predictable monthly payments.
Conversely, an adjustable-rate mortgage means your rate will change after an introductory phase. Monthly payments are poised to increase once the loan new interest rate goes into effect. This loan option is ideal if you plan on not staying at the property for longer than five years.
Knowing the basics on how mortgages work helps future homebuyers better find their comfort zone as they move forward.
As you chip away, don’t forget that an entire team is working hard for you. They’ll remind you what documents will be needed and will give you detailed guidance on next steps, which conform with standards set by government agencies and other guidelines that protect consumers as they chase their dreams of homeownership.
Contact us today to get started!