You’ve spent hours thinking about your dream home – but what about your dream mortgage? It takes work to find the right mortgage, and it helps if you know what you need to get started.
We’ll show you the mortgage process step-by-step so you can get ready to secure the right home loan for you and your family.
What is a Mortgage?
First, the basics. A mortgage is a loan you use to buy a home or other type of property. In most cases, a bank or other lender loans you the funds to buy the home. Then you pay back the loan in equal monthly installments over the life of the loan – usually 15 or 30 years.
A mortgage makes it possible for you to own a home in the Charlotte area without having hundreds of thousands of dollars in cash in the bank. Instead, you just need to be able to afford a monthly mortgage payment, which is ideally a fraction of your monthly income (experts recommend between 25% and 45% of your take-home pay*) plus your down payment.
To get a mortgage, you must show the lender that you are creditworthy. In other words, if they loan you the funds, you have the income and ability to pay them back.
For extra safety, the mortgage company will usually use your home as collateral to secure the mortgage. If you try to get out of paying the mortgage, they can simply take the house back. But if you pay off the mortgage as agreed, then the house becomes yours.
The Mortgage Process
Getting a mortgage follows a set process:
- Prepare your finances
- Get pre-approved* for a mortgage
- Make an offer on a home
- Apply for the mortgage
- Close the loan
Let’s look at how each step of the process works.
Preparing for your mortgage
The more time you spend preparing for your mortgage, the better off you’ll be. That’s why “getting ready” to get a mortgage is such an important step.
When you prepare for your mortgage, what you’re doing is getting your finances in good shape, so that you can qualify for a great home loan with a good rate and great terms. Typically, you’ll want to make sure you have a good credit score and enough money in the bank. Your getting ready punch list will look like this:
- Save up for a down payment: Although there are several down payment assistance programs* for vets and first time home buyers, you’ll still need to have enough money to cover the rest of the down payment as well as your closing costs (which are typically about 2% for a North Carolina mortgage). Use our Residential Mortgage Services Mortgage Calculator to get an idea of the kind of mortgage payments you can afford.
- Boost your credit: The better your credit score is, the lower an interest rate you could qualify for, and that will save you money in the long run – tens of thousands of dollars over the life of your mortgage. For instance, a credit score of 640 could qualify you for a North Carolina Home Advantage mortgage, while you’ll need a 620 or better to qualify for a conventional FHA loan. Work on paying all your debt payments on time, at least the minimum payment due, to start bringing your score up. It might take a few months but you should see results.
- Hold off on big purchases: That means not buying a new car and putting a bunch of furniture on your credit card right before you apply for a mortgage. Your mortgage lender wants to see that you have plenty of wiggle room in your budget to pay your mortgage – and hefty auto loans and credit card debt isn’t it.
- Gather your documents: Before you apply for your mortgage pre-approval (followed by the actual mortgage), it’s good to have all your important papers in order. That means recent pay stubs, your W2s from work, your last two tax returns, and recent banking statements. These documents prove that you’re employed and bringing in income, and how much. Your mortgage lender uses these papers to evaluate whether you’re a good prospect to loan money to.
Download our Home Buying Checklist for an easy-to-use reference guide for these important pre-mortgage steps.
Get a Pre-Approval
Once you’ve gotten your ducks in a row, as they say, it’s time to secure your mortgage pre-approval. A mortgage pre-approval lets you know how much you can expect to borrow, what type of loan you’ll get, and how much your interest rate will be. It’s not a guarantee that you will be approved, and those figures are subject to change if the mortgage application process turns up something surprising in your finances, but your pre-approval gives you a much stronger idea of what to expect when you’re ready to buy your home.
Your lender will send a letter detailing that information for your pre-approval. It will also specify when the pre-approval expires – because they don’t last forever! Usually, they’re good for about 60 to 90 days. If your pre-approval letter expires, you’ll have to go through the process again, although it should be faster the next time because you’ll have already submitted your financials
Meet with a Real Estate Agent
Pre-approval letter in hand, it’s time to shop for homes! Many people find this to be the most fun part of the mortgage process. Once you know how much you can afford and what type of mortgage you’ll qualify for, you can meet with a real estate agent who will help you find the right home for your budget and your lifestyle.
The agent will be glad you have your mortgage pre-approval letter because it shows that you’re a serious buyer and you’re committed to the process. They’ll be able to help you narrow down the choices of available homes, arrange showings, and recommend neighborhoods in and around Charlotte that may meet your needs. They’re also knowledgeable about North Carolina real estate laws and will be there to support you with the paperwork and throughout the mortgage closing process.
Don’t have a real estate agent? Any of our Mortgage Planners can refer you to one specialized in your area. Click here to find a Loan Officer.
Speak with a Charlotte Mortgage Lender
At last you’ve settled on the perfect home and made an offer — and the seller accepted it! Now it’s time to speak with a mortgage broker to get your home loan squared away.
It’s important to go with the best mortgage lenders you can find. After all, a mortgage is a long-term commitment! You need to be able to trust your mortgage broker and feel confident that they’re providing you with the best level of service. That’s why a lot of people choose a local mortgage broker – they’re looking for a verified reputation, a commitment to the community, and a dedication to providing a streamlined, effective mortgage settlement process. The right mortgage lender is going to walk you through the entire process and answer every question, so look for a reliable mortgage company that you can count on to be there for you.
Once you’ve settled on your mortgage company, applied for the mortgage, and filled out all the necessary paperwork, the mortgage goes to underwriting, which is where the right mortgage company makes sure that everything is in order.
Once your mortgage application is approved, the last step is closing day! That’s the day you sign on the dotted line, hand over your down payment, pay your closing costs … and get the keys to your new home. It can be an emotional day – but also an exciting one, because it’s the first day of your new life as a homeowner.
When you follow all the steps for getting a mortgage, you can be confident that you’ve truly done your homework and secured a great loan. At Fairway Mortgage of the Carolinas, we’re ready to help you every step of the way – just give us a call to get started.