How to Pick the Best Lender
As you begin to weigh your options for a mortgage lender to
help you buy your house, first choose the kind of experience you prefer. An
online lender lets you complete most, if not all, of the steps online without
having to spend a lot of time on the phone with your loan officer. For a more
hands-on approach, you may prefer a traditional mortgage lender, such as from a
local bank or credit union.
Another consideration when choosing a mortgage lender is
what kind of mortgages they actually offer. Most offer conventional loans, but
you may also consider government-backed programs such as an FHA, VA, or USDA
loan.
Looking for a specialized home loan? Choose a lender with specific experience so they can smoothly guide you through the application process.
Finally, ask prospective mortgage lenders what their average
time is for closing. Some lenders may be able to close in 30 days or less,
while others average 45 days or more.
Steps to Closing on Your Mortgage
A good mortgage lender is clear and transparent every step
of the way. Once you have an offer accepted from the seller of your dream home,
you’ll typically pay an earnest money deposit that’s held in an escrow account
until closing. At that time, it’s generally applied to any costs you owe.
Your lender will also request any outstanding documentation
to complete your application. Common requests to verify your finances and
employment include:
- Bank statements
- Paystubs
- Tax returns
An appraisal will also be ordered, which confirms that the
home’s value is equal to or greater than your purchase price. You can also
order an inspection, which helps you assess the condition of the home and
potentially negotiate repairs with the seller.
As your mortgage application goes through underwriting,
you’ll be able to lock in an interest rate and receive a good faith estimate.
This document outlines all the costs associated with the mortgage, including
your interest, monthly payment, and how much cash you’ll need at closing.
Once all of these hurdles are passed, you’ll meet with
your real estate agent and a notary to sign all of the loan paperwork. You’ll
also need to bring a certified check to cover your down payment and any closing
costs you’re responsible for.
Frequently Asked Questions
How do you know if you qualify?
Qualification standards differ based on both the individual lender and the specific type of mortgage you’re seeking. Some loan types require higher credit scores than others, for example. Down payment types can also vary program by program. Lenders also review your debt-to-income ratio to make sure you can afford monthly payments.
How long does it take to get to closing?
Home buyers can typically expect the mortgage process to take around 30 days. It could take longer during busy seasons when lenders have more loans to underwrite. Lenders with a particularly streamlined underwriting process, however, could get you to closing in under a month.
What’s the difference between getting pre-approved and pre-qualified?
Getting pre-approved for a mortgage is more formal than just being pre-qualified. Pre-qualification usually entails verbally telling a lender your financial overview to get an idea of how much house you can afford. To get pre-approved and make a firm offer on a home, you’ll need to undergo a credit check and submit financial documents for verification.
What documents do you need to buy a house?
This may vary by lender, but you’ll definitely need tax returns from the last two years, proof of income (like pay stubs or W-2s), and recent bank statements to confirm your assets. Your lender will also use your social security number to run a credit check.
How much money do you need to put down on a house?
It depends on your chosen type of home loan. You’ll need 5% for a conventional loan or 3.5% for an FHA loan. There are also relatively new programs that only require 3%. For a 0% down payment option, consider a VA loan if you’re a military member or veteran, or get a USDA loan if you don’t mind living in a more rural area.
Find the Best Mortgage Lender for Your Home Purchase
Buy your next house with the peace of mind that comes with a reputable lender.
by Lauren Ward
Personal Finance Writer
Lauren Ward is a personal finance writer with nearly ten years of experience covering topics like loans, credit, and real estate. She lives in Virginia with her husband and three children.
