Do you want to apply for a mortgage but feel some anxiety about the process? Getting a mortgage for the first time can feel intimidating, but the reality is that it has never been easier. Every year, millions of people successfully apply for and obtain mortgages. Here are a few reasons why you shouldn’t worry about the mortgage process, along with a few tips and tricks to help you get started.
1. Information and applications are available online
The web is a great source of information about the mortgage application process. In addition to helpful “how to” sites that lay out each step of the application, new mortgage marketplaces allow you to quickly apply online and review lender and rate options before you ever need to consult with an advisor. In the past, prospective homeowners relied on professionals for advice about which lenders offered certain rates; now, you can easily research and compare lenders yourself online. While you will eventually need to consult with a professional to complete the application, reviewing these resources beforehand can help you feel prepared when you begin the in-person consultation process.
2. Experts can help
Once you are familiar with the kind of mortgage you want as well as what rates and lender options are available to you, you should schedule a one-on-one session with a professional to ensure that you have all the information you need to make an informed decision. Some mortgage marketplace sites, like MortgageGoat, allow you to schedule these sessions online, and even offer bilingual support! While applying and getting approved for a mortgage is easier now than ever before, having a professional available to you along the way for questions and concerns can help make the process even smoother.
3. There are more lending options than ever
There are a number of options when it comes to choosing a lender, including traditional banks, credit unions, and non-bank lenders. The best option for you depends on a number of factors, including your credit score and whether you are a first-time buyer. As a first step to learning more about your options, you can visit a mortgage marketplace online. After entering preliminary information and running a credit check, these sites will connect you with potential lenders and rates for which you qualify.
If you are a first-time homebuyer and are worried about getting approved for a mortgage, there are a number of lending assistance programs that might help. Ask your advisor about lenders that partner with state agencies to offer discounts on mortgage rates, assistance on the down payment, or educational resources more broadly. These programs are specifically designed to make mortgages more affordable for first-time homebuyers. Some programs also offer affordable rates for veterans, individuals with hefty student loans, or public servants. If you qualify for more than one of these benefits, some lenders will allow you to combine them to ensure that you can afford your first home!
4. FHA loans can help make a home more affordable
One of the main misconceptions about getting a mortgage is that you will be responsible for 20 percent of the home’s purchase price as a down payment. These days, this is rarely a requirement! With a reasonable credit score, you can qualify for a mortgage with a down payment of 5 percent or less (even if the entire amount is gifted from close family). A NAR survey of over 8,000 homebuyers found that almost 90% of homebuyers chose to finance the purchase, and the median down payment amount for first-time homebuyers was 5%. An FHA loan (offered by the Federal Housing Administration) allows you to get a mortgage and only pay 3.5% as a down payment. FHA loans also have less stringent requirements for income and credit scores, which makes qualifying for the loan much easier.
There are a couple of requirements that come with these government-backed loans that you should review before you apply, including limits to the total amount that you can borrow as well as required mortgage insurance, which protects the lender if you are not able to make your monthly payments. While this insurance is typically not costly, it is another consideration when you are calculating your expected monthly payment.
If you are interested in an FHA loan, be sure to ask your lender about their options. While most mortgage marketplaces offer FHA loans, some banks may not.
5. Investing in a home is worthwhile
With rents increasingly becoming unaffordable all over the country, there has never been a better time to consider investing in a home. Depending on where you live, monthly mortgage payments are often much lower than median renter’s monthly payments. On top of that, when you pay monthly rent you are simply handing money over to a landlord. Monthly mortgage payments represent much more valuable future investments, especially if you factor in the resale value and tax breaks!