First Time Buyer Education: How Getting a Mortgage Works

As loan officers, our goal is to guide you through the mortgage application process and help you secure a loan for your first home. Here are the most important points and the general process you should be aware of:

Understanding Your Financial Situation

Before applying for a mortgage, it's crucial to assess your financial health. This includes your credit score, income, debt-to-income ratio, and savings. Lenders use this information to determine your eligibility and the terms of the loan.

Determining Affordability

Calculate how much you can afford to borrow. Lenders typically require your total debt payments should not exceed 45-50% of your gross income. However, what you can qualify for is not always what you can afford. Speak to your financial advisor about strategies to determine a monthly payment that is sustainable for your lifestyle.

Pre-Approval

Get pre-approved for a mortgage. This involves submitting financial documents to a lender who will review your creditworthiness and provide a pre-approval letter. This letter helps you understand your budget and demonstrates to sellers that you are a serious buyer. Greenlight loan officers will do a "soft credit pull" to avoid unnecessary hits on your credit.

Choosing the Right Mortgage

There are many options regarding mortgage rate. You can take the "base mortgage rate" with no extra fees, bring extra funds up front to lower your mortgage rate for the entire 30 or 15 year duration of the loan, or even take a higher rate and get a "lender credit" to reduce your total cash required at closing.

Down Payment

Save for a down payment. While some loans offer low down payment options, having a larger down payment can improve your loan terms and lower your monthly payments. 20% down allows you to avoid mortgage insurance, but keep in mind, the monthly payments for this type of insurance have decreased significantly in recent years. This is especially true for borrowers with stronger credit.

Documentation

Be prepared to provide documentation, including proof of income, employment history, tax returns, and information about your assets and debts. This information is essential for the underwriting process.

Home Search

Once pre-approved, start your home search. Keep in mind your budget and preferences. Your real estate agent can help you find properties within your price range.

Making an Offer

When you find the right home, work with your real estate agent to make an offer. The pre-approval letter adds strength to your offer.

Loan Processing and Underwriting

After your offer is accepted, the mortgage goes through processing and underwriting. The lender verifies all the information provided, assesses the property, and ensures that you meet their lending criteria.

Closing

Once the loan is approved, you'll attend the closing. This is where you sign the final paperwork, including the mortgage documents. You'll also pay closing costs and, if applicable, your down payment. IMPORTANT: Wire fraud is a massive issue. Never accept wire instructions from your lender, but only from the Title company and be extremely wary of anything received electronically. Always verify verbally with the Title representative. Practice extreme caution!

Ongoing Payments

After closing, continue making your mortgage payments on time. If you pay your property taxes and insurance as part of your payment, these will be paid for you automatically Stay in touch with your loan officer for any questions or concerns regarding your mortgage.

Remember, communication with your loan officer is key throughout the process. They are there to assist you and ensure a smooth home buying experience!