The Road to Homeownership: When to Apply and What to Expect

The Road to Homownership Part One, in last month’s Living Out,  told you what you should know before you apply for a home and now you’re ready to start the application process. However, don’t go in blind. Educate yourself on the process and the different types of mortgages there are available to you.

When to Apply
Some people wait until after they make an offer on a home to get approved for a mortgage, but it is best to do it beforehand. Why?

  • It lets sellers know you are serious. Many sellers will not consider offers from those without pre-approval.
  • It gives you a limit as to what homes to look at.

Once your home search turns serious, it is a good idea to get pre-approved. When you are pre-approved, you get a commitment from the lender to provide a mortgage for up to a specific amount, barring any major financial changes. The pre-approval typically lasts for 60-90 days.

Application Criteria
Lenders consider many factors when deciding whether or not to approve a loan and how much to approve you for. They typically include:

  • Your Credit Score
  • Down Payment Amount & Your Other Assets: Lenders typically set a maximum allowable loan to value ratio, which measures how much of the home can be financed through the mortgage.
  • Your Employment History: Lenders usually want to see a stable employment history.
  • Your Income: Lenders usually want to see a stable employment history.
  • Your Existing Debt

Different Types of Mortgages
There are many types of mortgages to choose from, below you will see the three most popular mortgages available, whatever your situation.

  • Fixed-Rate Mortgages: Fixed-rate mortgages come with an interest rate that remains constant over the life of the loan. Because the interest rate and monthly payment are fixed, they provide a stability that is appealing to many buyers.
  • Adjustable-Rate Mortgage (ARM): TARMs have a period of fixed interest, after which the interest rate and payment adjusts at specific intervals. In general, the interest rate and monthly payment for an ARM start off lower than for a fixed-rate mortgage of the same amount.
  • FHA (Federal Housing Administration): An FHA-backed mortgage makes buying a home easier – or possible – thanks to less-rigid borrower requirements:  a low minimum down payment (currently 3.5%);  reasonable credit expectations; more flexible income requirements.


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