Buying a Home for the First Time and Completely Totally Lost - Until Now

Use Lender411's simple guide to navigate the mortgage process. In this article, you'll find step by step instructions for getting a mortgage, as well as resources for more in-depth information. 

1. Create an affordable monthly budget

Create a budget to see what you're comfortable spending in a mortgage payment per month. Often a lender will qualify you for a mortgage payment higher than you are comfortable paying, but no one knows your budget better than you do. Calculate your monthly affordability using our mortgage calculator. 

2. Apply for mortgage pre-approval

Find a lender online, through a mortgage broker, realtor, or trusted friend or family member and speak with them about getting pre-approved for a loan amount. It will help you become more competitive when you go home shopping or approach real estate agents about helping you find a home. 

Lenders look for the following qualifications in home buyers:

• Stable Employment
• Stable Income
• Rent or Mortgage Payment History
• Credit History
• Savings History
• Source of Down Payment

Lenders will base a borrower's qualifications on credit scores and debt-to-income ratios. You can find requirements by loan type by choosing from the following mortgage program articles: FHA, Conventional, VA, USDA. Review your loan options with your lender and determine what loan type would best fit your needs.

The documentation needed for a pre-approval includes:

• 30 days of Pay Stubs
• Two months of Bank Statements
• Two years of Tax Returns with W2s and 1099s
• Two forms of Government Issued Identification

Other documentation could be needed (if applicable) such as:

• Divorce decree & separation agreement
• Bankruptcy and discharge papers
• Business returns (if self-employed)
• Retirement statements
• Canceled rent checks
• DD214 (VA loans only)
• Source of recent large account deposits

Review your credit report and contest any errors directly with the credit bureaus reporting the inaccuracies. Maximizing your credit scores will likely result in a lower interest rate and closing costs. 

3. Start (or continue) home shopping

Once pre-approved and have an accurate budget in mind, you are prepared to view properties. Using a reputable real estate agent will certainly make this part easier.

4. Formally apply for your loan

Once you have found the house and have accepted an offer, you will likely have to make formal loan application within five days of your accepted offer. After your formal loan application, the lender will order an appraisal. An appraisal typically can take up to 14 days to be completed and sent to your lender. After the appraisal is received, your loan file is sent to underwriting for final approval.

5. Close your loan

Before the closing appointment, request a copy of your HUD-1 Settlement Statement, which details your costs and terms of your mortgage. See an example here. Verify your mortgage payment, costs, down payment, and total funds needed to close. If there are any discrepancies, contact your lender immediately.

Mortgage loan approvals are subject to certain conditions. After meeting the requirements, you should receive a loan commitment letter, the title company should be notified, and the escrow company (closing agent) should contact you to set your appointment to sign your final papers.

Preparing, understanding, and having reasonable expectations during the mortgage process will undoubtedly decrease your frustration and anxiety. Keep everything in perspective during the mortgage process and be prepared for the delays may occur from circumstances out of your control (appraisal repairs, seller delays, etc). Stay in contact with your lender so you are informed of any delays, thereby allowing you to make the appropriate changes with your moving plans.

Michael Zuren, PhD

I have 25 years experience in the mortgage banking industry. My experience includes the following loan types: (1) HomePath, (2) OHFA, (3) FHA 203k, (4) VA, and (5) USDA financing. I have been serving Cuyahoga, Lake, Geauga, and Ashtabula counties in Northern Ohio... more