Financing is the most crucial aspect of home buying. Whether you’re a first time or repeat buyer, you must show proof that you are financially ready and capable of a home purchase.
We at The Sherry And Co. Real Estate encourage homebuyers to first get mortgage pre-approval before searching for a home. There are two major reasons for this:
- Pre-approval gives sellers confidence in your ability to pay. Many sellers agree to show their homes only to buyers with pre-approval.
- Pre-approval gives you a good idea of the home you can afford and, thus, helps in setting your budget. You can save time searching for homes by narrowing your choices only to those that fall within your budget.
The mortgage process in Georgia
Applying for mortgage is often the most stressful part of the home buying process. You will be asked to submit a number of documents, which could take time to compile. To avoid delays, it’s best to start the process as early as possible.
Here are the steps in applying for mortgage in Georgia:
- Identify a lender or a mortgage broker. It’s important to work with companies or individuals who have a good reputation in the industry and the community.
We can refer you to highly experienced and trustworthy lenders who can help with your financing needs. The lenders will present you with various loan options and help you find the loan product that best suits your current and prospective financial situation.
- Submit your loan application, either directly to the lender or through a mortgage broker.
- As part of your loan application, you will be asked to provide a number of documents to show your financial capabilities and transactions. These may include credit or loan statements, tax returns, paystubs from your employer, and disclosures like divorce settlements, marriage licenses, and bankruptcies.
- Within three days or so, the lender will provide you with a Loan Estimate, which lists down all closing costs and other costs related to the mortgage including title searches, origination fees, homeowners’ insurance, and any credit or charge points for the interest rates you have chosen.
- If the lender approves your application, they will issue a loan commitment letter saying they’re willing to fund the loan provided certain conditions are met. These conditions often include an appraisal of the property to be purchased.
- Once you find the home you want to buy, the lender appraises the property and, if everything is in order, releases the funds for your loan. If the lender’s appraisal is less than the property’s selling price, you have until the end of the appraisal contingency period on your purchase contract to renegotiate with the seller, or get out of the transaction.
What you should and should not do when applying for a loan
Remember that the higher your credit score, the better the terms you may get for your loan. Before submitting your mortgage application, review your credit score and find out if it can be further improved. Go through your credit report to see what could be pulling your credit score down, and then work to improve on that.
Your debt-to-income ratio has a big impact on your credit score. A low figure will help raise your credit score and will be looked upon favorably by lenders. Ideally, it should be no higher than 40%.
Once your loan application is submitted, lie low on major purchases or financial transactions that could affect your credit score. Here are some of the do’s and don’ts to observe during this period.
- Save all bank statements and paystubs until you close
- Disclose all properties (even if they are free and clear, with no mortgages)
- Let the lender know if you plan to use a business bank account
- Disclose all types of income
- Check your application for accuracy
- Disclose debts that may not appear on credit
- Provide an explanation for large deposits or cash gifts
- Deposit cash or other non-payroll related checks
- Buy a car, truck, boat, motorcycle, or anything else you have to finance
- Change jobs
- Change banks
- Have credit pulled or open new credit cards
- Spend money you need for closing – lenders want to see the money being used for the down payment seasoned for 60 days
- Change home owners insurance without telling the lender