Donna Coakley McGowan's Blog
Applying for a mortgage may seem like a long, stressful process at first. Fortunately, we're here to help you take the guesswork out of submitting a mortgage application.
Now, let's take a look at three tips to help you streamline the mortgage application process.
1. Ask Questions
A bank or credit union likely will ask you to provide a wide range of information as part of the mortgage application cycle. And as you complete a mortgage application, you may have questions along the way too.
Remember, a lender is happy to help you in any way possible. If you ever have concerns or questions as you complete a mortgage application, you should reach out to a lender for expert support. That way, you can reduce the risk of potential problems down the line that otherwise could slow down the mortgage application process.
Even a single mistake on a mortgage application may prevent you from getting a mortgage. Perhaps even worse, a delayed mortgage application may force you to miss out on an opportunity to acquire your dream house. But if you reach out to a lender as you complete your mortgage application, you can gain the insights you need to quickly and effortlessly finalize the necessary documentation to obtain a mortgage.
2. Be Thorough
A mortgage application may require you to look back at your financial and employment histories and provide information that a lender will use to determine whether to approve or deny your submission. Meanwhile, you should be ready to provide a lender with any requested information to ensure a seamless application process.
As a homebuyer, it is your responsibility to include accurate information on your mortgage application. In fact, failure to do so may cause a lender to reject your mortgage application. If you allocate the necessary time and resources to dot every I and cross every T on your mortgage application, you can boost the likelihood of a fast approval.
3. Shop Around
For homebuyers, it is crucial to check out all of the mortgage options that are available. If you meet with a variety of banks and credit unions, you can review myriad mortgage options and select a mortgage that complements your finances.
Banks and credit unions generally provide a broad array of fixed- and adjustable-rate mortgages. If you learn about all of the mortgage options at your disposal, you can find one that enables you to purchase your dream house without breaking your budget.
Of course, once you are approved for a mortgage and are ready to launch your house search, you may want to hire a real estate agent as well. A real estate agent will offer plenty of guidance at each stage of the homebuying journey. In addition, a real estate agent can make it easy for you to find a top-notch residence at a budget-friendly price in any housing market, at any time.
Start the mortgage application process today, and you can move one step closer to acquiring your dream residence.
If you’re hoping to buy a house in the near future, you’ll want to focus on saving for a down payment.
Down payments are a way to let a lender know that you are a low-risk investment, and a way to save money on interest over the term of your loan.
If you have your other finances in order--a good credit score and stable income--there’s a good chance that making a 20% or more down payment will land you a low interest rate that can save you thousands while you pay off your loan.
How large should my down payment be?
The larger the down payment you can afford, the more money you’ll likely save in the long run. While there are ways to get a loan with no or very small down payments, these aren’t always ideal.
First, if you put less than 20% down on your home loan, you’ll be required to pay private mortgage insurance, or PMI. These are monthly payments that you make in addition to the interest that is accrued on your loan.
So, if you don’t put any money down on your home, you’ll accrue more interest over your term length and you’ll pay PMI on top of that.
What affects your minimum down payment amount?
Lenders take a number of factors into consideration when determining your risk. If you’re eligible for a first-time home owners loan, a veteran’s loan, or a USDA loan, your loan can be guaranteed by the government. This means you can likely pay a lower down payment while still receiving a reasonable interest rate.
When applying for a mortgage, be sure to reach out to multiple lenders and shop around for the rates that work for you. Many lenders use slightly different criteria to determine your eligibility to pay a lower down payment.
Other things that affect your minimum down payment include:
Location of the home you want to buy
Value of the mortgage
Saving for a down payment
You’ll get the most value out of your mortgage if you put more money down. However, if you’re currently living in a high-rent area, it could mean that it’s in your best interest to get out of your apartment and start building equity in the form of homeownership.
If you want to buy a home within the next year or two, there are a few ways you can help increase your savings.
First, determine how much you need to save. Depending on your housing needs and the current market, everyone will have different requirements. Do some home shopping in your area online and look for homes that are within your spending limits. Remember that you shouldn’t spend more than 30% of your monthly income on housing (mortgage, property taxes, etc.)
Next, find out what a 20% down payment on that home would be, adjusting for inflation.
Once you have the amount you need to save, remember to leave yourself enough of an emergency fund in your savings account to last you a month or two.
Carefully document your incomeWhen you sit down with a lender and hand them your proof if income, you want to make it as obvious as possible that you're earning money in a reliable and predictable way. Lenders will want to see multiple documents that can help paint a better picture of your income and finances, including:
- Bank statements
- Schedule C tax forms
- Profit and loss tax forms
- Completed tax returns
- Credit score (they will run a credit check)
Separate your business and personal financesIf you own your own business, you likely have business banking accounts you use for expenses and invoices. But freelancers and contract workers often simplify things by just using their personal checking and savings accounts for income. To make things clear for lenders, you should put your income and business expenses into a separate business account. Not only will this make it easier for lenders to quantify your income, but they can also use this information to see that your expenses are for helping your business rather than personal spending.
Timing is everythingThere are a number of factors that go into choosing the right time to apply for a mortgage. Being self-employed only complicates the matter since your income might not be as steady as your average wage worker. You'll want to commit to a mortgage at a time when you've had at least two consecutive years of good, reliable income. You'll need to prove this with the aforementioned documents (bank statements, tax forms, etc.). Part of this planning could be to avoid large business expenses in the two years leading up to your mortgage application. This isn't always possible, of course, but it could be enough to boost your apparent income to get you approved for a better loan.
Seek specialized lendersSome lenders are aware that there is a large portion of the country made up of self-employed workers and small business owners. They go out of their way to work with people who are self-employed so they can give them fair deals on their mortgages. To find specialized lenders, you'll have to do some research online, but it could make all the difference when it comes to getting approved for the loan you're looking for.
No income verification mortgage loans sound like a great idea. Also known as stated loans, these are easier to obtain than traditional mortgages. You won’t have to go through endless amounts of paperwork that traditional mortgages require. Think again. These types of loans are high risk and borrowers may have a hard time paying these loans back. Many lenders have removed these kinds of loans from their list of options. In certain circumstances, these loans can work for you, but you have to do your homework.
Where Can You Get A Stated Loan?
Some lenders still provide these stated loans with no verification process required. Unlike earlier times, these loans are now pretty difficult to obtain. Typically, this type of mortgage is geared towards the self-employed and requires a large down payment. Also, the borrower must have a very good credit score to be considered for the loan.
Are Stated Loans Unaffordable?
Since these loans come at very high interest rates, they are often seen as unaffordable due to the high monthly payment. Stated loans can have double the interest rate of what the current available mortgage rates are. However, if you don’t have many options, or are in a hurry to get a home and have money in the bank, it could work well for you.
Could A No Income Verification Loan Be Right For You?
If you really want a home loan, the first step is to be truly honest about your income. If you find a beautiful home and know that it’s out of your price range, you could risk defaulting on the loan.
To truly understand what you can afford, you’ll need to figure out all of your monthly expenses including taxes, mortgage insurance, phone bills and grocery bills. This will give you a full picture of your finances. Once you look at all of these factors, you may find that it does make the most sense for you to get a no income verification loan.
Deciding On The Type Of Loan You’ll Get
If you find that you need a lower monthly payment, it may make more sense for you to go after a traditional home loan. If you’re self-employed and know that your options are limited, a stated loan certainly is an option for you, you’ll just need to understand the risks of the entire process. You’ll also need to have a bunch of documents ready for the lender once you decide to go for the home loan. You can compare the costs of a no income verification loan to a traditional mortgage. Then, you can ask your lender what they’ll need from you in order to verify everything for the traditional mortgage. Any good broker can help you through your decision-making process. You’ll want to be well informed and compare all of the programs along with their fees. You should get recommendations on a lender who has the knowledge and experience to help you find the home loan that’s right for you.