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Six-Step Guide to Applying for a Home Loan

Not sure of how to go about the home loan application process? The process of applying for a home loan is becoming a lot easier, and many lenders now even allow prospective borrowers to submit their applications online. Here’s our simple, six-step guide to the process. 

Step 1: Do Your Financial Paperwork

Before you start the application process, get your paperwork ready so you can avoid delays later on. Be prepared to submit your full name, list of all your dependents, details of the past two years of your residential addresses, bank and/or retirement statements, and details of all your assets.

In addition, you’ll also need to provide employment and income information including pay stubs and W-2s for the last two years. Also, provide the name, address, and phone number of your current employer.

Step 2: Know the Basic Loan Requirements

You should check the following things before you apply for a home loan:

  • Debt-to-income ratio: Ideally, you should keep your debt-to-income ratio to below 43%.
  • Credit score: The higher your credit score, the lower your interest will be.
  • Verifiable assets: Save up for your down payment and closing costs.

Step 3: Choosing the Right Mortgage

There are six main types of mortgage loans – the 30-year fixed loan, 15-year fixed loan, conventional loan, FHA loan, VA loan, and USDA loan. Go through the terms and conditions of each of these loans and check which one would be most suitable to you. 

Step 4: Consider Your Repayment Ability

Decide after careful thought what your maximum monthly payment level can be, taking into account expenses relating to healthcare, childcare, education, utilities.

Step 5: Choose the Right Mortgage Lender

Get the monthly loan estimate from at least five lenders. Make a detailed comparison of all the terms and conditions put forth by all five lenders and choose what is best for you.

Step 6: Fill out The Mortgage Application

Once you’ve decided which loan you’d like to go ahead with, you can apply to the lender you have chosen in one of the following ways – online application, over-the-phone application, and in-person application.

Not all lenders offer the first two application options. It is best to opt for an in-person application since you can get your last-minute doubts or concerns clarified across the desk.