Congratulations! You’ve decided to buy your first home!
You already know real estate is an excellent investment and have an idea of what you want. You’ve been thinking about neighborhoods, number of bedrooms, and visiting furniture stores with stars in your eyes. You’re finally achieving your American Dream!
Buying your first home is incredibly exciting, but don’t get carried away just yet! Before starting your search for the perfect home, take the time to get pre-approved for a mortgage loan. Did you know that not every home will qualify for every mortgage? It’s better to know that sooner than later!
Getting pre-approved for a loan will provide your agent with information about what you can afford and your financing options. Pre-approval clarifies the buyer’s price range, guarantees that amount for a set period, and establishes specific criteria that will save time during your search.
A mortgage pre-approval letter will take time and stress out of the home buying process, and prevent you from spending unnecessary money.
The Mortgage Pre Approval Process
Clean Up Your Credit!
The first step to getting pre-approved is checking your credit history and scores. Lenders use all three major credit-reporting agencies (Equifax, Experion, and TransUnion) to evaluate your creditworthiness. Resolve any outstanding accounts or collections promptly and get any payment agreements in writing. High credit card balances negatively affect a buyer’s debt-to-income ratio. Clean up your credit and pay down that debt!
What Documents Do You Need?
Once your debts are paid, and any negative reporting is resolved, it’s time to collect paperwork and proof. You will need proof of income, such as W2 forms, pay stubs, and two years of tax documents. Lenders will consider bank and investment account statements alongside evidence of cash savings for down payments. They will verify your employment history and salary, and you will also need to provide photo ID and your social security number.
Types of Home Loans
There are several types of loans, and each has conditions that must be met. Some offer fixed-rate financing; others have variable APRs. Some loans only finance certain types of properties, and others have varying requirements for insurance, down payments, and appraisals.
Loans are considered on a case-by-case basis, and your lender might require additional information or paperwork from you. Cooperating promptly and providing correct and current records will help the approval process go smoothly. Once you've collected all this information, it’s time to decide what type of loan best suits your needs!
Conventional loans are fixed-rate or adjustable-rate mortgages from private lenders that are not insured or guaranteed by the federal government. These loans have strict eligibility requirements regarding down payments, interest rates, and income but will finance the widest range of properties. Conventional loans can be used to purchase single-family homes, multiple unit properties, and primary, vacation or rental homes.
FHA loans are insured by the federal government and offer more relaxed standards than conventional loans. These types of loans are easier to qualify for and require a smaller down payment, making them a great option for first-time homebuyers. The Federal Housing Administration offers a broad range of programs and down payment assistance options. FHA loans can be used to buy single-family homes, vacant property with intent to build, HUD approved townhomes or condos, and manufactured homes with a permanent foundation.
VA loans are guaranteed by the US Department of Veteran’s Affairs for our country’s service members. They offer better terms and low or no down payment but require an eligibility certificate from the VA to qualify. VA loans can be used to purchase existing single-family homes or those under construction, modular homes, or condos/townhomes on the VA’s approved list.
Your American Dream is Our Mission
Having that approval letter in hand will allow you to begin your home search confidently. Let Duck Brothers Real Estate guide you through your real estate journey in Waco, Texas.
Our company combines a home turf advantage with industry expertise to help our friends find the perfect place to call their own.
Call 254-613-6326 or visit our website to start your home-buying adventure today!
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Tiffany Edgecomb is a freelance writer specializing in real estate and lifestyle content ranging from food to personal finance. She’s the founder of The Alphabet Soup Company and has been writing for almost a decade.