By Brad King, Private Wealth Mortgage Banker with US Bank
Buying a home can be an entire mix of emotions from excitement straight through to sheer panic, that’s why it’s always best to have a REALTOR by your side. A REALTOR will point you in the right direction every step of the way and stay by your side through to closing. Homebuyers, especially first time homebuyers, can feel overwhelmed in the process especially if they don’t know what to expect. The REALTOR is your advocate, your concierge, your advisor, your ‘manager’ and sometimes even your therapist. Once you find the right agent, they will also connect to you a few of their most trusted lenders who can tell you everything you need to know about a home mortgage and what it takes to get financing.
To help take some of the guess work out of what is needed to secure a mortgage loan, we have asked one of our trusted favorites, Brad King, Private Wealth Mortgage Banker with US Bank to provide four key things to know about the home buying process when it comes to your mortgage loan.
Q: When do I start the process of securing a home loan?
Beginning the process of buying a new home isn’t necessarily hard but the process is structured and specific in what one needs to secure financing. Preparing well in advance of when one plans to purchase a home will greatly reduce potential paperwork issues and challenges down the road.
Q: Is there anything I should do before contacting a lender for a home loan?
The loan process begins initially with the analysis of three things: Credit, income, and cash to be used for closing. It’s a great idea, before one does anything, to go to the 3 credit bureaus and request a credit report from each and review them for accuracy. The best interest rates go to those with scores in the 700’s and up. You are entitled to one free report annually from the three main credit bureaus. You can make your request here.
Q: What income is looked at by the lender for qualifying purposes?
Lenders are required to document a borrower’s “ability to repay”. This means a very thorough analysis of the borrower’s qualifying income. This is where “cash flow” and “qualifying income” can be two different things in the eyes of a mortgage lender. The lender must analyze the income type, source, and likelihood to continue. Income from anything other than salary or hourly wages get more scrutiny. Engage the lender in advance to insure what one thinks their income is and what the lender thinks it is are the same.
Q: What other forms of assets should I consider?
Lastly, liquid assets (cash on hand or an asset that can be converted to cash) must be documented to insure they are from the borrower’s assets and can be appropriately documented or “sourced” to prove they belong to the borrower.
Getting these things done before engaging in a real estate search will greatly improve one’s chance for success in the house hunt! Best thing to do is start your home search process by getting “pre-qualified” – meaning, contact your lender of choice and begin working on your mortgage application. This will help determine how much of a house you are actually qualified to purchase based on the information provided above. There is nothing worse than finding the home of your dreams only to realize you can’t get a loan for the home forcing you to begin your search all over again.