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7 essential steps for getting a mortgage

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This story is sponsored by Mountain America. Learn more about Mountain America.

In a time of rising interest rates and a fast-moving housing market, getting a mortgage might seem insurmountable for a first-time homebuyer. According to CBS News, 30-year mortgage rates are higher than they’ve been in the past four years, and this is affecting the number of people buying homes. While your income and credit score will greatly affect your ability to get a mortgage, these are things that take time to change. Luckily, there are some steps you can take now to start the ball rolling for you to get into a home in the near future.

Step 1: Know your budget

A mortgage expert can help you determine how much room is in your budget for a home loan and what types of adjustments you can make. Make this step in the process easiertrack all money coming in and going out. Keep that flow as consistent as possible during the time youre shopping for a home and mortgage. Pay all bills on time to keep your credit score up, and save, save, save. Having a consistent budget will make things easier to calculate when it comes time to qualify for a mortgage loan.

Step 2: Know what you want

After determining how much money you have to spend on a home mortgage, think about what type of home you want. Consider single-family and other types of housing, along with the specific floor plan you are looking for. Do you want a yard? What size? Think about how some factors could affect your desire for a home, such as an HOA fee or the need for immediate repairs. As always, prioritize what you want based on the budget you have, including the location of the home.

Step 3: Gather information

To prequalify for a loan, youll need to gather several documents to show a potential lender. These documents could include bank statements, tax returns, pay stubs, debt statements and other information detailing your assets and spending. Its good to keep documents like these on file anyway so youre aware of your finances. Youll also need to fill out a loan application with your chosen lender, which gives it more details to create an accurate profile.

Your mortgage officer will quickly look over this information (income, assets, debts and credit history) to make a preliminary determination of the loan amount for which you qualify, explains the Home Buying Institute . This process is called pre-qualifying. This is an important step towards getting a mortgage, but the one you really want to check off your list is obtaining a preapproval letter.

Step 4: Get preapproval

Next to a competitive offer, one of the best things you can show a seller is a preapproval letter. This is a letter given by your lender and printed on the company's letterhead that states that it agrees to finance your purchase of a home up to a certain amount. The difference between pre-qualifying and preapproval is that the former is more to tell you if buying a home is possible and the latter focuses more on exactly how much you can afford.” With this document in hand, you look serious and capable to any given seller, which makes them all the more likely to choose your offer over others.

Step 5: Make an offer

Usually with the help of a licensed real estate agent, you can make an offer on one or more homes that you could see yourself purchasing. This step can happen before you are preapproved for a loan, but buyers usually choose offers that already have preapproval, according to Realtor.com. Once under contract, your home should be thoroughly inspected for signs of damage or problems that could affect your home’s value, which in turn will affect your loan amount.

Step 6: Get a home inspection and appraisal

The contract you’ve made with the seller will include several deadlines, including a due diligence or inspection deadline and the appraisal deadline. These dates are to protect both you and the lender should the home you want to buy have real issues that would change your mind about the purchase or prevent the lender from financing the loan.

Order a home inspection from a reputable company that is certified to do home inspections in your state. Ask questions during the inspection, and then read the report to know if there is any reason you shouldn’t go forward. Then comes the home appraisal, which estimates the value of your home to determine a relevant loan amount.

Step 7: Close the loan

At the end of the contract period is the settlement deadline, which is when the buyer, lender and seller all sign the contract and the loan closes. This date happens after all the other deadlines have passed and all parties want to go forward with the contract. Adjustments or addenda to the contract can be made before this time, but usually they are only small changes to the bottom-line cost. Once you’ve signed the necessary documents and the contract is recorded, the home, and the mortgage that goes with it, become yours. Congratulations!

The process of getting a mortgage doesn’t have to be complex, but it helps to have a trusted mortgage expert at your side. Contact a mortgage expert near you with Mountain America Credit Union today.