How To Get Mortgage Loan Online-A Step To Step Guide 

Nikhil Goswami

Purchasing a home is one of the best things you can do for yourself. However, getting a beautiful, well-vanished home that seats in a calm and peaceful neighborhood is arguably expensive. Hence unless you have a pool of dollars, you’ll require financial help to buy such a home. Thus the need for mortgage loans.

You might have heard about the best mortgage loans as specific types of loans. Access to these loans can help you own your dream house without hassles. But do you know how to get a mortgage loan if needed? Of course, anyone must understand the dos and don’ts of mortgage loans. Then you can start thinking of shopping for your dream home. That includes understanding the people involved and the process involved. So you can avoid wasting a lot of your time.

Thus, in this article, we will teach and prepare you to know the things you need to get ready before you get a mortgage loan. In the guide, you’ll learn what mortgage loan lenders need from you, the documents needed, and the five simple steps involved in the entire process.

Let’s get started!

What Are Mortgage Lenders Looking For?

Things have become quite different in the mortgage market due to rising crises of late payments, among others. For that reason, mortgage lenders are making the application process more elaborate to avoid such crises.

Nowadays, lenders look for some factors such as credit history, income, and assets, among others, when a customer applies for the best loans/mortgage loans. By doing this, they know if the customer will be able to repay the loan and that there will be no late payment. 

To elaborate in detail, the following are the key factors that a mortgage loan lender will consider before offering you a loan.

Income And Job History

This is one of the significant factors that a mortgage lender will consider before giving you a loan. This is because lenders want to know if you can make regular payments from your regular income. Most often, lenders love borrowers who have a regular source of income because they are assured that such individuals will repay the loan on time. So, if you have a good income, borrowing a mortgage loan will be hassle-free. 

On the other hand, if you don’t have a regular income and your amount in the bank is insufficient, borrowing can be pretty tricky as lenders might be inclined to avoid you. But, if you have a good job that provides sufficient funds for your needs and more to spare, your lender can consider this and give you a suitable mortgage loan to buy an amazing house. 

Another thing you should not do is quit your job or switch to a different career before applying for a mortgage loan. This is because getting home loans requires clarifying that your income source is stable and that you have had the job for a long time. 

Credit Score

It is good to know that credit report matters regarding mortgage loans. Your credit rating will determine whether you will get a loan or not. If you have a good credit score, lenders will know that you can make payments on time and that your borrowing rate is not high. On the other hand, low credit scores may make lenders skeptical. They assume you will make your payments late and probably mismanage your funds. Thus a low credit score makes borrowing difficult. This is because many lenders will try as much as possible to avoid giving you money.

Generally, for a government-backed mortgage, you only need a minimum credit score of 580. For a conventional loan, you must have a credit score of at least 620. So, you will decide on the mortgage program that fits your credit score.

For you to get more lenders offering lower interest rates, you should try to improve your credit score. You can do this for at least a few months. Then proceed to apply for a loan. Lastly, review your credit reports and identify any mistakes. Such errors can decrease your credit score.

Debt-To-Income Ratio (DTI)

Similar to the income and credit score assessments, the debt-to-income ratio (DTI) is also a strong indicator. Most lenders use it to determine if you qualify for a mortgage loan. But what is a debt-to-income ratio? Typically, this is the gross monthly percentage used to pay your total monthly debt. It also determines the risk involved in lending you money.

Mortgage lenders calculate their customers’ debt-to-income ratio (DTI) by dividing their minimum monthly debt payments by gross income. This is done for each month. However, expenses like Netflix subscriptions and groceries are often excluded when calculating the debt-to-income ratio.

The DTI that a lender may want from a customer can vary due. This is due to different types of mortgage loans existing on the market. For example, conventional loans require a DTI of at least 50%. While for a government mortgage, the debt-to-income ratio is much higher. But, in most cases, lenders avoid giving mortgage loans to borrowers with DTIs that exceed 43%. This is because lenders want to be sure that their borrowers find it easy to repay their monthly payments.

Asset Assessments

Apart from your credit score and the debt-to-income ratio, mortgage lenders will ask about your assets when checking the application for your loan. Basically, assets are items you own and have a monetary value. These assets include cash, properties, and cash equivalents.

Most lenders consider cash and equivalent assets as well as liquid assets. This is because they are easily accessible. For example, liquid assets can be easily converted into cash if you run out of funds within a short time. Therefore, these can be useful when it comes to monthly mortgage payments.

By evaluating your assets, a lender will check whether you have the capacity to make prompt payments.

Property Type

The type of property you plan to purchase influences the loan type you want. This is because different properties will have varying risk levels which are the lender’s liability. For instance, if you buy a small family home and use it as your primary residence home, you will likely get good terms and conditions for the mortgage deal. This is because lenders know that the cost of such homes is suitable for many people’s budgets. And you will probably pay your loan on time.

In comparison, investment property mortgages are much higher and costlier than primary residences, which is more than the budget many people have. So, to balance the possible risk, lenders will demand a sizeable down payment amount and a high credit score for you to qualify for this type of mortgage. Therefore, it’s also good to note that some lenders won’t finance properties like mobile homes, and commercial places, among others.

Down Payment Value

When borrowing a mortgage loan, if you pay a higher down payment, you can get a lower installment spread over a couple of years. So, when you make a high down payment, you will improve your chances of getting a high mortgage loan. Plus, your lender will consider you as a low-risk borrower. Otherwise, the low down payment mortgages will attract low mortgage rates.

Notably, industry standards require mortgage loan borrowers to make a down payment of 20% of their total loan amount. But, it is always advisable to pay upfront the money you can easily afford. Some mortgage programs, such as FHA loans and VA loans, allow buyers to make low down payments after agreeing to make payments for private mortgage insurance.

What Documents Do I Need To Get A Mortgage?

To examine your debts and income and other financial indicators to prove your status as a worthy applicant, lenders will require crucial documents when you apply for your mortgage loan. However, the exact forms will vary depending on the situation. For instance, if you are self-employed, you will provide different forms including financial statements, unlike someone employed by a particular company. 

These documents speed up the loan acquiring process as well as lowering lending risks like a late monthly mortgage payment. Below are some of the documents you should present when applying for a loan.

  • Income Proof

Under this category, there are various documents that a mortgage lender may need to prove your income source and earnings. They include:

Tax Return Form: Mortgage lenders want details about your financial situation. So, you will likely sign Form 4506-T, which usually allows the lender to get a copy of the property taxes given by the IRS. 

Similarly, 1099 forms are also vital documents that consist of different tax forms that reveal different payment types made by a particular individual. These forms typically are not from your employer but from other sources. 

Pay Stubs, W-2s, and other Income Proofs: The pay stubs provide information the lenders will use in gauging your recent earnings. It shows a record of your wages; thus, the lender will understand your taxes, deductions, and contributions. The W-2s usually show your annual wages and tax amount retained from your paychecks. 

Moreover, if you are self-employed or have other income sources like child support, you must show your lender some proof by presenting direct deposit statements. 

Profit and Loss Statements Form, if Employed: This form will determine the loan amount a lender can offer you. The statements often show your net monthly income and include your expenses, costs, and revenues.

Gift Letters: Your family or friends might assist you in buying a house by donating funds to you. In such cases, you must provide a well-written confirmation letter to show that the money is a gift, not a loan. You must include the way you are related to them and the gift amount that they donate. 

Credit Documentation

Apart from proof of income, your mortgage lender will examine your credit status. The lender will search whether there are negative factors such as bankruptcy and foreclosure in your credit history. If you have any of these bad financial experiences, it will be difficult for your lender to offer you the loan you want. 

Therefore, if you have had any mitigating circumstances which might have destroyed your credit, you can explain these situations to your lender. For instance, if there are any missing payments on the credit card balances caused by medical emergencies, you can give the lender copies of medical bills. The copies will prove that your credit deteriorated due to that medical emergency and that there are no other circumstances. This will increase your borrowing chances. 

Proof Of Assets And Liabilities

Your lender will ask for some of your documents when verifying your assets and liabilities. The documents include account statements for the last sixty days, confirming that the assets available in your saving or checking accounts are valid. Also, the lender will know the types of assets in these accounts.

Apart from that, you must provide documents showing the sales of assets you did before applying for your mortgage loan. For example, a lender may want a title transfer copy if you sold a car to raise some funds. Moreover, a lender can ask for your recent statements if you have retired. These statements summarize your benefits, deductions, and your pay at a particular time in your life. Retirement statements show your credit card bills and records. 

Another proof your lender may want is that of the gift funds, deposited into your bank account at least two months before applying for your loan. Gift funds, commonly known as down payment gifts, are liabilities that lender considers when giving you a mortgage loan. So, if you have not saved enough cash in your account, your lender will allow you to use gift funds to purchase a home if you wish to. 

Renting History

If you are renting while borrowing a mortgage loan, your lender may want proof to show that you can pay the required rent on time. Most lenders often ask for rent history of about one year. This may include providing even the canceled documents. These documents are most important if you lack substantial credit history. 

A positive renting history means you are more likely to get fast loan approvals. A negative rental report may make your lender deny your application. So, having the renting history in your hands can probably increase the chances of securing your residency at the place of your choice. 

How To Get A Mortgage: 5 Easy Steps

After compiling and putting all your documents together, you are now prepared to start the mortgage application process. Remember, the process is a bit long and thorough for mortgage loans, unlike in other loan types such as car loans. However, the process can be made simple if you deal with an experienced, reputable, and right mortgage dealer.

Either way, here are detailed steps you will expect to go through while applying for mortgage loans.

Step 1: Apply For Mortgage Pre Approval

The pre-approval process is the first stage of applying for mortgage loans which you will do to let you know the loan amount you can get from a potential lender. Your duty is to apply for a pre-approval mortgage so that the lender can consider you. In this case, the lender will look at your assets, income, and credit scores and give a loan quote featuring the amount of mortgage loan you can borrow. Also, they will evaluate and determine the interest rate for the loan, which they might include in the loan quote.

Remember not to confuse pre-approval with pre-qualification. The two terms are different, although they sound similar. For instance, in pre-qualification, there is no asset verification; hence less accurate compared to pre-approval. Also, pre-qualification won’t let you know how much mortgage loan you can lend, despite being helpful in some situations.

On the other hand, pre-approval can let you know the amount you’re eligible to lend. This is because, during pre-approval, the lender will need your credentials, such as your debt obligations and proof of income, to validate your qualification.

There are many advantages to applying for mortgage pre-approval. For instance, you will be able to know the amount of loan you can borrow from a lender. Alternatively, pre-approval will help you choose the type of property you can buy. Also, it helps attract more real estate agents and sellers offering good house deals in the home-buying process.

During the pre-approval stages, you will need to check your credit score and customize your mortgage solutions to appeal to you.

Checking your credit score: When applying for mortgage pre-approval, you need to answer various questions. This could be your assets, income, and the type of home you plan to buy. Also, you will be required to guarantee your lender permission to check your credit score.

As aforementioned, your credit score is the report that shows your previous borrowing history from other creditors and lenders. This can be your borrowing reports from banks, Credit card companies, credit unions, and other types of lending firms. The lender will want this borrowing history to verify your eligibility for a loan before approval.

Customizing your mortgage solutions: After verification of your credit reports, the choice is yours to select a customized mortgage solution that appeals to you. There are different mortgage solutions that you can compare by checking how much loan they offer you. However, while choosing your ideal mortgage solution, take time and learn about the loan types you’re eligible for, individual interest rates, down payment requirements, and monthly payments.

Step 2: Get Your Approval Letter

After finding an ideal mortgage loan solution for yourself, confirm online if you are approved. Luckily if approved, you can now begin house hunting for the house you want to buy. 

However, sellers and real estate agents want to see proof of your mortgage qualification. In that case, you need to get a pre-qualification letter from the lender, which you can use to negotiate house offers from various sellers. Alternatively, you can get verified approval from a Home Loan Expert, which will help you convince sellers more. 

Step 3: Find A Property And Make An Offer

This is the most crucial step in applying for a mortgage loan. Since these loans are specifically for buying a home, you need to take this step seriously and get yourself a home that you feel comfortable and satisfied in. 

To make your search easy, connect with real estate agents around your location, especially if you’re new in the real estate industry. Remember, every market has people who always look to mislead others for their personal gain; hence you should be careful when choosing the agent. You can ask your friends or family members to refer you to a trustable and genuine dealer. 

If you get good real estate dealers, they will help you get a perfect home. The dealers have a wide range of home designs, and you can ask for samples to choose your ideal home depending on your preferences and budget. Of course, some agents will ask for some tokens, which is worth the service.

This is because the real estate agent will also help you submit your offer after selecting the house. Nonetheless, they will potentially negotiate on your behalf with the seller. Hence, it is more important to utilize a real estate agent while searching for your home than to decide to do it yourself.

Now, after you agree with the seller on the budget, it’s to accomplish the process of buying your home courtesy of mortgage loans.

Step 4: Verifying The Details

This step seeks to verify the authenticity of your details and steps taken from the beginning. It involves the underwriter checking your finances, income, and assets to verify accordingly. Thus, you will be required to provide all the paperwork and documents you initially used while applying for the mortgage loan. 

On the other hand, your lender needs to verify your property and personal details. Verifying property details may involve checking the home’s title, ordering an appraisal, and conducting any necessary house inspection they want. Similarly, verifying personal details entails cross-checking the information you initially gave while applying for the loan to see if they are still the same.

After the underwriting process, a document known as closing disclosure is given out to you. The documents contain everything you should know concerning your mortgage loan, including a down payment, monthly payment, closing costs, and interest rate. Take your time and confirm if the contents featured in the closing disclosure are similar to your loan estimate given by your lender during the initial three days of applying for your loan.

Step 5: Closing

Now you have your mortgage loan approved. The final, equally important step is to attend a closing meeting. During the meeting, utilize the opportunity and ask anything you’re not sure about your loan. You can ask for clarification on payment terms, interest rates, and terms and conditions if they aren’t familiar to you.

Also, during the closing meeting, recall bringing your closing disclosure, your valid passport-size photo, a copy of your valid ID, and your down payment. Similarly, you should carry a check for closing costs and a pen to sign your loan. Once you sign for your loan, there is nothing else left but to enjoy your new home as you plan to honor the loan repayment terms. 

Conclusion: Getting A Mortgage Loan Is Easy? 

Before thinking of getting a mortgage loan to buy a house, you should know the requirements and evaluate the amount you qualify for. Unlike other loans such as student loans. And Auto loans and mortgage loans Leaders require a series of documents to verify your eligibility. 

For instance, they will need to examine your job history, assets, debt-to-income ratio, and income. Also, they will require you to evaluate your credit history. And the type of home or property you plan to buy. Thus it is your duty to provide all these details without obligations when ordered. This gives Lenders ample time to verify your validity and approve your loan on time.

If you were wondering how to get a mortgage loan, hopefully, you now know it’s a simple process. It will be easier as long as you have relevant details. The first step is applying for mortgage pre-approval. This gives you an idea of the loan principal you can borrow. Also, being pre-approved for mortgage loans makes it easier to choose and buy a home within your budget. This is because, after you’re pre-approved, the second step that follows is collecting a pre-qualification letter that you use to search homes.

While searching, it is always advisable to engage a real estate agent. Hence the third step of getting mortgage loans. The agents are helpful in searching and finding a decent home without wasting time. Also, a real estate agent can negotiate with the seller on your behalf. 

What follows after negotiations is the process of sealing a price agreement with the seller. This happens after getting full loan approval from your lender. It also involves ordering appraisals, underwriting, and verifying the home’s title. And finally, you will receive a closing disclosure.

As a loan seeker, you must attend a closing meeting once your loan has been approved. This is because you must bring your down payment. And closing costs and sign on your loan during that meeting. After which, you can move into your new home. Then you plan a strategy to start paying back the mortgage loan as agreed with the lender.

 

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