Nuts and Bolts: The Specifics of What You’ll Need for Your Mortgage

A couple meets with a loan officer to discuss their mortgage options

If you’re looking for a mortgage, you’ve probably discovered just how much home loan information is out there. The amount of material can get a little overwhelming.

That’s why we’ve done a simple breakdown of the process of getting a mortgage, geared specifically for first-time homebuyers. In this post, we’ll focus on things you’ll need—the nut and bolts—to get your dream home.

General Mortgage Rates and Requirements

There are many details involved in the process of getting a loan. Lenders want to make sure they’re making a good investment by lending to you, so they’ll want to see plenty of information to estimate the likelihood of you repaying your loan. Some of your qualifications will determine the rates and terms they offer you.

Though requirements can differ between loan types and lenders, the following are some expectations you’ll generally want to meet to get a loan:

  • Credit – Credit is an important aspect of the loan. It helps lenders know how much of a risk they’re taking on if they give you a loan, and therefore how much interest to charge you (or whether the risk is worth even giving you a loan at all).

    For most loans, you’ll need a credit score of at least 640. For larger loans, this requirement can be somewhere closer to 740. Additionally, some loans (like FHA loans) allow for eligibility with a lower credit score—though this sometimes means higher interest rates or other increased payments.

  • Debt-to-Income Ratio (DTI) – Many loans require that your DTI is less than 43%. This means that the amount you pay for debts every month can be up to 43% of your gross income each month. However, this requirement may be smaller, depending on the loan type, lender, and your other qualifications.
  • Documentation – Required documentation can vary between loans, but will usually include tax returns, W-2s or 1-9s, pay stubs, and more. When it comes to getting a mortgage, you can expect to do a good amount of paperwork.
  • Home Inspection – Before committing fully to a property, you’ll want to find a licensed inspector to make sure the home you’re considering is in good condition.
  • Interest – Interest rates vary between loans and depend on your qualifications. Additionally, you can get either a fixed-rate mortgage or an adjustable-rate mortgage (ARM).

    A fixed-rate mortgage means that your interest rates will not change over time, while an ARM has interest rates that are normally fixed at a low rate for the first few years of the loan, but can fluctuate after that period.

  • Down Payment – Depending on the loan, the percentage you’ll be required to put down on a home can vary from 0-20%, but the larger the down payment you can make, the better. It’s definitely worth it to save up some money to be able to make a sizable down payment—it can get you much better terms on the loan.
  • Steady Income – You’ll need to have a steady income, as well as pay stubs to prove it. Make sure you don’t quit your job before the deal is closed, as this can change your terms significantly, or even prevent the loan from going through.
  • Mortgage Insurance – Many loan types will require you to have insurance, depending on factors like the size of your down payment. Insurance reduces the lender’s losses in the event that you can’t make the payments. You may be able to avoid buying insurance if you make a down payment of at least 20%.
  • Closing Costs – Closing costs are often paid when the transaction is over, and they can be somewhere around 3% of the price of the home. Different lenders will charge different fees, and there are some instances where, as a first-time homebuyer, you can get your costs paid for or loaned to you by the government.
  • Time to Pay Off the Loan – You can choose either a 10-, 15-, or 30-year mortgage. Interest rates will usually be higher the longer it takes you to pay off the loan, but that doesn’t mean it’s always better (or possible) to go with a 15-year mortgage. The one that is right for you depends on your circumstances and goals.

Shop Around for a Lender

As was mentioned earlier, requirements and rates are not the same from lender to lender. Make sure to speak to multiple lenders to get the best option for your situation.

Who We Are

At Low VA Rates, we specialize in VA loans for veterans and strive to give each veteran the best home buying experience we can. However, we can help people from all backgrounds find the best loan for their situation.

We know that deciding to buy or refinance a home is one of the biggest decisions you’ll make, and we are committed to doing everything we can to make it the rewarding experience it can be.

If you have any questions or are ready to begin your journey toward homeownership, please feel free to take a look around the rest of our website, or give us a call at (866) 569-8272.

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