How To Get A Mortgage

Published 07-19-2019 by Rico Castillo

You need to get a mortgage to buy a home.  If you don’t have the cash to buy a home outright, then unless you acquire it illegally, you’re going to need a mortgage.

When I talk with new home buyers and we go over what they need to get started in the buying process, we always go over getting a pre-approval from a lender so they’ll know where they stand financially.

Most of the time, they’re prepared for the process, but sometimes, I get someone who has no idea where to start and when I mention that they need to get a mortgage, they always have that scared look on their faces.

They think it’s going to be . . .

• Really expensive and more than they can afford
  
• More than they’re currently paying for rent
  
• Hard to qualify
  

It’s a classic case of being afraid of the unknown.

So, to lessen their fears, I go through the basics of what they need to get a mortgage. . .

Think Of The Number “2”

When you get a mortgage, be prepared to get a lot of paperwork for your lender.  To begin with, you’ll need to have . . .

1. Two years worth of W2s
   
2. Two months worth of recent bank statements
   
3. The last two recent pay stubs.
   

The list is for all borrowers who is going to be on the loan.

If you’re applying for a VA loan, you’ll also need your . . .

• Original copy of your DD214
  
• Certificate of Eligibility
  

Talk with your favorite lender.  There may be more items needed, but what’s listed above are needed for sure.

Order You Credit Report Before Meeting With A Lender To Get A Mortgage

When are getting ready to get a mortgage, two things always come to mind - down payment money and your credit.

It would only make sense to order your credit report ahead of time.

When I say “order,” I don’t mean to actually have it pulled from the 3 credit bureaus by a company, because that would affect your overall score. 

Once a year, you have the right to contact each of the 3 credit bureaus (Experian, Equifax and TransUnion) and ask for a free copy of your credit report.

The report won’t include your credit score, but that is not what you’re after.  What you’re actually looking for are what is IN your credit report.

If there are any discrepancies or mistakes in your credit report, take care of it now by sending a dispute letter to the credit bureau that is listing it and provide any supporting documents that those items are mistakes.  By taking care of these mistakes, most of the time, your credit score will take care of itself.

Make sure to go over your credit reports with a fine-toothed comb. 

1. Make sure you look at old credits that may still show a balance though they’ve been paid off.
   
2. Any collections that have been resolved.
   
3. Any child support that is not updated (like showing you owe a balance though you do not)
   
4. Any items that aren’t yours and may be from another person who has the same name as you do, etc.
   

There are many items in your credit report that could cause you to either not qualify or qualify for less when you apply to get a mortgage.  It would be wise to order your report ahead of time and dispute any mistakes.

I would start this process at least 6 months before meeting with a lender.  You can keep saving for your down payment while waiting.

Down Payment Funds Needed To Get A Mortgage And Its Source

You are going to need some money when you buy a home even if you’re getting a 100% loan, such as a VA loan.  You still need funds for closing costs and inspection reports - though in a VA loan, you can get a true VA No-No and have the seller cover it all.

Even then, you still need funds for your initial down payment or Good Faith Deposit, as well as for the inspection reports.  You’ll just get reimbursed later if it was agreed to by the seller during the negotiating process.

Most of the time, however, you will need money towards the purchase.

This does not mean you have to have the money in your immediate bank account.  Go over this with your lender, but your down payment could come from your other sources, like:

• Your retirement account 
  
• a gift from a family member 
  
• Sale of your belongings (Make sure you deposit the money you get from the sale at least a month before you apply.  Your lender may want to know the source of the deposit)
  
• Life insurance policy
  
• If it doesn’t affect your debt-to-income ratio, it may be worth it to get a personal or car loan
  

Talk with your lender and go over where your down payment is coming from if it’s not from your immediate bank account.  If it is in there, but it’s large deposit, make sure you have documentation of its source.

The down payment you need to get a mortgage can come from . . .

A Down Payment Assistance Programs

Did your ears just perk up?  I’ve seen many of my first time home buyers sit back and breathe a sigh of relief after I tell them about down payment assistance programs.

These programs can come from government agencies, local programs and sometimes from your employer.  Just ask your lender and you HR department to see if there are any available.

Sometimes, the program will run out of money for the year and you may have to wait until they have funding available again.

“What if I still need more time to work on my credit or save more money for my down payment?” you ask!

I have good news for you, my friend, because there is a . . .

Different And Innovative Way To  Finance A Home

I wrote an entire article on this, but here is a quick rundown of this awesome program.

It is a lease-to-own type of program that will allow you to earn equity on the home during your lease term.

You can then use the equity towards your purchase of that home when you’re ready to buy the  home.

What could be better than earning equity while renting? 

To me, it’s free money.

In Conclusion . . .

If you want to increase your chances of getting approved when you get a mortgage, then be prepared.  Start to work on your credit now by ordering your free credit report from each of the 3 bureaus, while saving as much as you can for your down payment.

You can also start looking into using alternative ways for your down payment as well as inquiring into different down payment assistance programs. 

Talk to a real estate agent who knows the real estate and mortgage process to increase your chances of a successful home purchase.  

Getting into a home may take a lot less money to get started than you think.

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