After making the decision to purchase a home, many individuals next look for financial assistance or a loan to complete their home purchase. A loan to buy a home is called a mortgage. Before you shop for a mortgage, however, make sure you know how much you can afford to spend on a home purchase with a financial snapshot – your actual income and expenses. Armed with your financial snapshot, you are ready to take the first step towards obtaining a home mortgage.
Step One: Obtain Information About Available Home Loan Programs
Many financial institutions, including banks and credit unions, have mortgage loans officers to assist homebuyers, so take advantage of the help they provide. Mortgage brokers shop and help people sift through information to make selections. They help you apply and receive mortgage loan pre-approval and final approval.
The Virginia Housing Development Agency (VHDA) has loan programs, including homebuyer programs that benefit first time homeowners or people who have not owned a home in the last three years. To qualify for a VHDA loan, the homebuyers must meet the minimum to maximum income levels and sale price and loan limit requirements based on home locations. The homeowner must also attend a mandatory in-person or online class on homeownership. The federal government also offers home buying programs.
Step 2: Obtain Mortgage Pre-Qualification
Before attending your first open house, obtain a mortgage prequalification letter from a mortgage lender. This letter should say that you are preapproved for a mortgage and state the amount and time period. It outlines the loan amount, potential down payment, and interest rate. Usually attached to an offer, it indicates to a seller that you are serious about buying the home and that you can pay the sale or offer price of the home.
Step 3: Formally Apply for Loan
Once an offer is accepted, the homebuyer formerly applies for a mortgage. During this period, you may be required to pay down debt and asked to avoid making major purchases that impact your credit. You must be prepared to share information and proof about your income, assets, and liabilities; like pay stubs, bank statements, divorce agreements, income tax returns, and monthly debt obligations like credit cards, student loans, and auto loans. At this stage, you also pay for a credit report for each applicant and the home appraisal report.
Step 4: Approval and Funding
Eventually, the mortgage is approved, and you will move on to the real estate settlement. A real estate settlement is a meeting to pass property from the seller to the buyer. At the settlement, the homebuyer signs papers like the settlement statement, note, and deed of trust. For information about the various disclosures made to buyers during the home buying process see the Real Estate Settlement Procedures Act (RESPA). Keep in mind the mortgage approval has an expiration date so the settlement must take place before it expires.
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If you're considering buying a home in Virginia you'll want to download our free printable whitepaper "Top 9 Tips for Buying a Home in Virginia." You will gain invaluable insight into making your home purchse as smooth as possible.