How to Get a Mortgage in 10 Easy Steps
Buying a home is exciting, but it can be challenging if you don’t know how to get a mortgage loan for a house or the steps to getting a mortgage, especially if you’re a first-time homebuyer.
Some basic requirements for getting a home loan include income, employment, a credit score, tax returns, and other documentation that all mortgage lenders need in order to determine your eligibility to repay a mortgage loan.
There are several types of lenders that offer mortgages and home loans, including credit unions, banks, and online lenders. However, credit unions, including Credit Union of Southern California (CU SoCal), are often the preferred choice for several reasons, including low interest rates, low or no fees, and lower closing costs. Learn
how to choose the right mortgage lender.
What do you need to get a mortgage? Before you shop for a home we recommend getting a mortgage preapproval from your chosen lender. The preapproval will give you an idea of how large of a mortgage you can afford, so you know what price range homes to shop.
At CU SoCal, we make getting a home loan easier!
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Read on to learn more about how to get a mortgage loan for a house.
Get Started on Your Mortgage Today!
What Is a Mortgage?
A mortgage is an agreement between a borrower and a lender that allows the borrower to purchase or refinance a property. A mortgage loan is a type of “secured” loan created specifically to help people finance the purchase of real estate property, including houses, townhouses, condominiums, co-ops, lots and acreage, modular homes, commercial property, and others.
Secured loans require the borrower to designate an item or amount of money as security or collateral (in this case the borrower’s home) to secure the loan.
Learn more about
mortgages and how they work.
What do you need to get a mortgage?
As you start the mortgage application process, your mortgage loan originator (also known as a loan officer or mortgage broker, depending on the type of lender you’re working with) will require that you provide the following information:
- Employment and Income. This includes paystubs, W-2s or 1099s, and proof of income.
- Credit Score. Your loan originator will ask your permission to view your credit score.
- Assets and Cash Reserves. This can be found on your bank statements and investment account statements.
- Debt-to-Income Ratio (DTI): DTI is your total monthly expenses divided by your total monthly income before taxes. Lenders will calculate this to determine if you’ll have the funds to repay the loan. Lenders typically require a DTI from 36% to 43%.
- Property Type. This describes the type of property, such as a single-family home, condominium, co-op, or manufactured home, for example.
- Down Payment. This is the amount of money that a homebuyer or property buyer “puts down” to secure an offer that has been accepted by the seller.
- Home Appraisal. Your lender will require that you hire an appraiser to determine the market value of the home.
- Mortgage Insurance. Conventional loans with less than 20% down require PMI be paid as part of the monthly mortgage payment to protect the lender if the borrower fails to repay the loan. With a down payment of 20% lenders won’t charge PMI on a new mortgage.
Getting a Mortgage
Getting a home loan will be easier if you’re familiar with the process of getting a mortgage loan.
Your real estate agent and mortgage lender can also help you with the steps to getting a mortgage.
Here are the most important steps all home buyers should be familiar with:
- Check Your Credit Score. Knowing your credit score before you apply for a mortgage can save you time. If you find your credit score is low (below 580), you’ll likely need to build your credit score to qualify for a mortgage. Check it for free here.
- Create a Budget. If you already have ample savings for making a down payment on a home, you’re a step ahead! Otherwise, saving money for the purchase of a home will require creating a budget so your savings add up quicker. Reducing your unnecessary expenditures, going out to eat less, and even working a second job are some of the ways people save money to buy a house.
- Research Mortgage Options. There are many types of financing options for purchasing a home and many types of lenders as well. Choosing the right lender and the right mortgage program can save you money. Below is a breakdown of different mortgage options available:
- Conventional Loans. A conventional loan is one that is not a government-backed loan. There are two types of conventional loans, conforming and non-conforming
- Non-Conforming Loans. These types of loans don’t meet the terms and conditions set forth by Fannie Mae, Freddie Mac.
- FHA Loans. Popular among first-time homebuyers, FHA loans require a minimum 580 FICO score. Borrowers with a minimum 580 credit score may be eligible for an FHA loan with only a 3.5% down payment.
- VA Loans. Insured by the U.S. Department of Veterans Affairs, VA loans are available to qualifying U.S. Armed Forces Veterans, Active Duty Service Members, certain Reservists and National Guard members, and certain surviving spouses of deceased Veterans.
- USDA Loans. This government loan program helps low and very low-income applicants obtain housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability.
- Jumbo Loans. These loans are used to finance high mortgage amounts, often for luxury homes. A jumbo loan is a non-conforming loan, as it doesn’t conform to the requirements of Fannie Mae, Freddie Mac, and their regulator, the Federal Housing Finance Agency (FHFA).
- Adjustable-Rate Mortgages (ARM). ARMs typically start with a promotional adjustable rate, then re-adjust periodically. This means your monthly mortgage payments will fluctuate higher or lower based on the financial index that the ARM is tied to.
- Fixed-Rate Mortgages. All fixed rate mortgages have a fixed interest rate for the life of the loan.
- Find the Right Lender. A mortgage lender is the financial institution that provides real estate purchase financing. Examples of lenders include credit unions, banks and mortgage companies.
- Apply for a Mortgage Preapproval. Start by talking to a mortgage loan professional about your homeownership goals. To get pre-approved, you will need to provide the documents mentioned above, and the mortgage professional will ask your permission to check your credit score. Once approved, you will receive a “preapproval letter.”
- Look for Your New Home. Bring your pre-approval letter (or a copy) when you shop for a house. Home sellers and real estate agents often prefer to work with buyers who are pre-approved for a mortgage, and your offer will be looked at more favorably.
- Submit a Loan Application. Although you already received a mortgage pre-approval, you’ll still need to complete a mortgage application which provides the lender with more details about your savings and debt. Once the application is submitted, it will travel through the lender’s underwriting and processing departments for approval. Once approved, you will have a “mortgage commitment.”
- Underwriting. This is the lender’s internal process for reviewing the documents you provided and making sure your able to meet the specific requirements for the type of loan you’ve applied for.
- Prepare for Closing. This includes getting a homeowners insurance policy. All lenders require the borrower to have home insurance, which the homebuyer will need to purchase prior to closing on a home purchase.
- Close on Your New Home. Once your application is approved, the loan is clear to close. These days, many closings are done virtually with funds wired to the seller. A Title Company, chose by the seller, will typically manage the closing.
If you have questions about these steps to getting a mortgage, CU SoCal can assist you with the process of getting a mortgage loan.
Why Savvy Consumers Choose CU SoCal
For over 60 years CU SoCal has been providing financial services, including mortgages, Home Equity Loans, HELOCs, car loans, personal loans, credit cards, and other banking products, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.
Please give us a call today at 866.287.6225 today to schedule a no-obligation loan consultation with a CU SoCal Member Services specialist.
Get Started on Your Mortgage Today!