How to Apply for a Mortgage: What to Know and Which One to Choose

Did you always dream that you’d be renting an apartment forever?  We doubt it!

There is nothing quite like owning your own home. It’s yours, to live in as you want and style as you wish.

You should be proud of the hard work and money you put into your home. But it doesn’t come without a lot of questions and stress. Your financial situation is yours alone, and at Fellowship Home Loans, we look at all of the factors to find the ideal financial position for your family.

Whether you’re a first time buyer, or your family is growing and you need a larger home, Fellowship Home Loans can help your move into the house that will become your home.

Getting Started

The application process can take a lot of work, but we’re here to make it as straightforward for you as possible. You can start by understanding what we look for when you submit an application:

• Liquid Assets – This includes checking and savings accounts. If you spend time building these up before you apply, you will have a better chance of getting a home loan. But, don’t get stuck in the rut of saving forever! You won’t know if it’s enough until you try.
• Additional Investments – 401ks and other types of retirement accounts. The more money you have to draw from should you need to, the better.
• Household Income – It is important that you have steady income. It is important that we know you don’t constantly change jobs.
  
  But that doesn’t mean a new job will hurt you. If you are responsible in your work, that’s all that matters. If you are self employed or own a business, simply show us your tax returns so we have an idea of what your income is.
• Debt-To-Income Ratio (DTI) – Some loans allow a higher debt ratio than others. For example, the threshold on FHA loans is higher than conventional loans when looking at the debt ratio.
• Credit Score – Many people dread this part of the puzzle, but it is important. Because of the economic issues in our country over the last decade, many people believe their credit score will stop them from getting a loan.
  
  This isn’t necessarily true. If your credit score is in the high 500’s or low 600s, there are different types of loans you can consider.

You don’t want to be weighed down by a loan you can’t afford, and don’t want to put yourself in that situation. The ideal first step is to submit an application and move from there.

FHA Financing

You may not qualify for a traditional home loan. That isn’t the end of your homeowner journey though. If you can’t get a traditional loan, your ideal bet may be an FHA mortgage.

You may have credit issues. Your income could be low. This is okay. In fact, today’s market may be expecting too much, especially in the current economy. That’s why FHA loans exist.

The benefits of FHA Mortgages:

• Fixed Rates – Never worry about the rates increasing or having to change your budget.
• 30 Years – Longer loan terms mean smaller monthly payments.
• Lower Credit Score requirements – You can get a loan with credit scores as low as 580.  
• Low down payments – Only 3.5% down required.
• Low insurance premiums – As low as 0.85%.

FHA Loan factors really change the landscape of the process. Now, it’s easier than ever to focus on the reason behind the low credit score, without getting held up on numbers and statistics alone.

Adjustable Rate Mortgages

ARMs have rates that can change, opposed to a Fixed Rate Mortgage which is the same forever.

In plain English, ARMs start with very low rates and very low payments. After the first year, the rates adjust based on the market at the time. If the rates in your market are unusually high, you should strongly consider this.

In order to protect our clients from huge market changes, we have a cap on our ARM rates. Even if the market jumps quickly, you will never have to pay more than an agreed upon rate.

The obvious drawback is that it can seem like gambling. There are times when this kind of loan can really help. By nature the rates are lower than fixed-rate loans at the start. If you plan on moving in less than 5 years, this could be your ideal option.

Fixed-Rate Loans

When it comes to finance, surprises are bad.

If you’re stable, get a stable loan. No matter what happens in the market over the life of the loan, the rates of a fixed-rate loan never change. Many people find that a slightly higher loan is well worth the peace of mind.

Takeaway

The housing market has changed. Gone are the days that you had to rent to save money. Unless you plan on moving around often or changing to a less-lucrative career, owning a home is one of the ideal long term investments you can make.

You can afford to buy if you can afford to rent, and if you want to buy there are many options. If you’re recovering from hard financial times, you may be approved for a FHA loan. This is only one of many government-funded programs that can help you. We advocate for all of these programs and can help you find the one that’s right for you.

If you’re ready, contact Fellowship Home Loans to discuss which options are right for your unique situation. It seems overwhelming, but with our help your dream home may be right around the corner.