The process of applying for and obtaining a mortgage can be a daunting one. Not only do you have a list of requirements that can seem insurmountable, but there are also countless forms and pieces of paperwork that must be filled out. It’s easy to feel like you have more questions than answers when undertaking the mortgage application process. Fortunately, Mr. Cooper has the answers to many of the questions that you may be asking.
How Do I Qualify for a Mortgage?
The first meeting that you have with a lending professional can be intimidating, as you may find yourself bombarded with questions. However, if you can go into the conversation knowing what they’re looking for, it can help you be significantly less stressed. When a lending official is determining whether or not you’re approved for a mortgage, they will consider your employment status, how long you have been with that employer, your annual income, how much debt you have, the value of your existing assets, and how much of a down payment that you plan on paying. Essentially, the lending official that you work with will do a detailed search into your financial capabilities. If you meet their requirements (they vary somewhat from one lender to the next), you will be approved for a mortgage.
What is the Difference Between a 15-Year Mortgage and a 30-Year Mortgage?
On the surface, the answer to this question is simply 15 years. However, it’s important to understand that there are significant financial implications to choosing a mortgage of a certain length. When you opt for a 15-year mortgage, your monthly payments will be much higher than the monthly payments on a 30-year mortgage. That’s because you have to pay the loan back in 180 months instead of 360. However, there are also benefits to opting for a 15-year mortgage. Since you have to pay interest on the money that you borrow, you end up repaying much closer to the principal amount of the loan. While the monthly payments are higher on a shorter mortgage, the overall financing is much more affordable.
What Does My Credit Score Need to Be to Get a Mortgage?
There is no definitive answer to this question, as different lenders and different mortgage types have different requirements for approval. For instance, many conventional mortgage lenders will require a credit score of at least 620 for a conventional mortgage. However, there are mother mortgage types on the market, such as an FHA loan that only requires a credit score of 580. As the applicant, it’s up to you to understand the minimum credit score requirements for the type of mortgage that you’re hoping to obtain.
Can I Contest Mistakes on My Credit Report?
Absolutely! It is not uncommon for people to find errors in their credit reports. In fact, a study published by Consumer Reports indicates that roughly 29% of people find mistakes on their credit reports. Some of these mistakes may be minor, while others could have a major impact on your credit score. However, the severity of the mistake isn’t all that important. Before you apply for a mortgage, you should certainly consider obtaining your own credit report and examining it thoroughly. If you find any mistakes, you should contact the credit bureau immediately to refute the mistake. If you don’t feel like you are capable of disputing the credit report, consider working with a professional credit repair specialist. Getting the mistakes off your credit report can not only help ensure that you get a mortgage, but it can also help you get more favorable terms.
Is There a Difference in Being Prequalified and Preapproved?
If you meet with a lender and have a cursory conversation about your assets, debts, and the price of the home you would like to purchase, you can technically say that you’ve been prequalified. There is no paperwork required for a prequalification. Essentially, it comes down to a conversation between a potential applicant and a lender in which the lender says that they can “make something happen.” However, the preapproval process is very different, and in many cases, is required for the purchase of a home. When a lender preapproves you for a loan, he or she will have done much of the research necessary to offer a final mortgage approval. In most cases, preapprovals require the loan application has at least reached a phase of preliminary underwriting. Prequalifications are certainly fine to have, but preapprovals carry much more weight when you’re working with a realtor and beginning the process of purchasing a home.
How Much Do I Need for a Down Payment?
Certain types of loans require certain percentages as a down payment. For instance, some conventional loans require you to be able to put at least 20% of the total cost of the home down. However, other types of loans, such as FHA loans, only require 3.5% down. Obviously, when you pay a larger portion of the overall value of the loan down, it diminishes the amount that you will have to pay over the life of the loan. However, it’s often difficult to come up with 20% of the price of a home that you’re interested in buying. As is the case with most aspects of obtaining a mortgage, there are pros and cons associated with paying a higher down payment. Generally, we encourage clients to plan on paying around 10% down. This still allows you to receive favorable terms on a loan while still keeping enough money in your pocket to cover closing costs and other expenses associated with purchasing a new home.
Mr. Cooper wants to help customers make their dreams of homeownership a reality, and they believe that the best way to do that is to ensure that future homeowners are informed about all of the aspects of applying for and obtaining a mortgage. If you have more questions about the mortgage process, or you are ready to apply for a home loan, contact the Mr. Cooper mortgage expert team today!
