Things You Might Not Understand As A First-Time Homebuyer
Posted on: 30 December 2020
The home loan process can be complicated and confusing, especially for people who have never purchased a home before. If you are a first-time homebuyer, you might not understand the process. If you feel confused about it, you might worry or feel stressed as you begin working with a lender. You can ease these worries by learning more about the home-buying process, and here are several things to know that might help you understand it a little more.
The Factors that Lenders Look for When Approving Home Loans
One thing that many first-time homebuyers wonder about is the factors that lenders look for when approving home loans. Most lenders look at four main things:
- Your credit score
- Your debts, debt-to-income ratio, and finances
- Your job history
- Your down payment amount
When a lender reviews your application, these are the primary things they evaluate. If you want to get approved for a loan, you can ask them for more information about each category.
How Escrow Works
When you get your first loan, the lender might tell you that you will need an escrow account. Many first-time homebuyers do not understand what this is or how it works, but understanding it is vital. An escrow account is a savings account that your lender opens for you. Each month, you pay a little extra with your mortgage payment to cover the taxes and homeowner's insurance on your house. The extra money you pay goes into this escrow account, and your lender pays these expenses when they are due.
What the Underwriting Process Is
When you approach your home purchase closing date, the lender sends your loan file to a department called underwriting. You cannot close on the house purchase until underwriting approves it. The underwriting department checks and double-checks every piece of information relating to your loan to ensure that you qualify for the mortgage.
How Closing Works
After the underwriting department approves your loan, your lender can schedule your closing appointment. You must sign all the documents related to purchasing the home with the new loan during this appointment. Once you do this, you can move into your new house.
Understanding some of these things can help you know what to expect when buying your first home. If you are working toward owning a home of your own, schedule a consultation with a group of first-time home buyer specialists that serve your area.
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