Mortgage Process For Home Buyers And How Home Loan Process Works

This BLOG On Mortgage Process For Home Buyers And How Home Loan Process Works Was Written By Gustan Cho NMLS 873293

Mortgage Process For Home Buyers And How Home Loan Process Works is important prior to starting the home buying process. Most home buyers will need to obtain a mortgage for their home purchase.

• The home buying process includes Mortgage Process For Home Buyers
• Understanding the Mortgage Process For Home Buyers is part of the home buying process
• Buyers should understand the basics of Mortgage Process For Home Buyers including the various loan programs
• Qualifying for a mortgage is not like applying for a credit card
• It is not like going to a car dealership on a Saturday, choosing a car, applying for auto financing, and driving the car off the lot
• Rules and regulations in auto finance is different than mortgage regulations
• Car owners who do not make payments on their auto loan, the lender will repossess it in a matter of days
• Mortgage Lenders take on way more risk when funding home loans
• There are strict mortgage regulations when it comes to defaulted home loans
• It takes months if not years to complete a foreclosure process
• There are risks mortgage lenders need to take
• Lenders need to make sure mortgage borrowers have the ability to repay their home loans

In this article, we will discuss and cover the Mortgage Process For Home Buyers And How Home Loan Process Works.

Starting Home Buying Process

Getting qualified for a mortgage is the start and first step of the home buying process:

• Most homeowners stay in their homes for many years unless they are property flippers and/or real estate investors
• Mortgage rules and laws often change
• Mortgage Rules and Laws are different for most home buyers than the last time they have obtained a home mortgage
• In this blog, we will explain the mortgage process for home buyers so they understand the basics
• Understanding the mortgage process for homebuyers will often avoid last-minute mortgage denials and stress during the mortgage process
• One key important fact in understanding the mortgage process for home buyers is that the pre-approval stage of the home loan process is the most important part of the overall mortgage process
• The number one reason for stress during mortgage process and last minute mortgage denials are due to loan officers not properly qualifying borrowers and issuing a pre-approval letter without borrowers being properly qualified

This is not the borrower’s fault but an inexperienced loan officer giving the thumbs up for homebuyers to purchase a home when they were not properly qualified.

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Mortgage Process For Home Buyers: Understanding Loan Programs

Although homebuyers will get recommendations by loan officers on which loan program is best for them, they should still understand the basics of the mortgage loan programs available out there. We will cover the basic government and conventional loans that are very popular in the U.S.

Here are the loan programs available to owner-occupant home buyers:

• FHA Loans: Federal Housing Administration (FHA) loans, also referred to as FHA mortgages, encompass a mortgage loan program established by the Federal Housing Administration, are mortgage initiatives overseen by the U.S. Department of Housing and Urban Development (HUD), these loan initiatives aim to enhance access to homeownership for individuals who may have constraints such as minimal down payment savings, lower credit scores, or financial hurdles that could hinder their eligibility for a traditional mortgage.
• VA Loans: VA loans, and oans Affairs loans are mortgage loan programs specifically designed to assist active-duty military personnel, veterans, and eligible surviving spouses in obtaining financing to purchase or refinance homes. The U.S. Department of Veterans Affairs endorses these loans, offering a multitude of advantages to eligible borrowers.
• USDA Loans:  USDA loans, Rural Development loans, or USDA Rural Housing Loans, are mortgage loan programs offered by the United States Department of Agriculture (USDA). The purpose of these loans is to assist individuals and households in rural and certain suburban areas purchase homes with favorable terms. USDA loans offer unique features and benefits primarily to promote homeownership in rural communities.
• Conventional Loans: Conventional loans, also referred to as conventional mortgages, are mortgage financing options that lack government backing or insurance provided by entities like the FHA, the Department of Veterans Affairs, or the United States Department of Agriculture (USDA). These loans, instead, originate from and are financed by private lender such as banks, credit unions, and mortgage companies.

There are also non-QM loans where there is no waiting period after housing events and/or bankruptcy. We also have bank statement mortgages for self-employed borrowers where there are no income tax returns required.

Choosing Mortgage Lenders And Do All Lenders Have Same Mortgage Guidelines

Not all mortgage lenders have the same lending requirements on FHA, VA, USDA, Conventional Loans.

• Just because borrowers get denied by their local bank does not mean they do not qualify at another mortgage lender
• All mortgage lenders need to follow agency lending guidelines
• However, they can have additional lending requirements that are above and beyond agency guidelines
• This extra layer of lending guidelines is called lender overlays
• Most lenders do have overlays on government and conventional loans
• Gustan Cho Associates Mortgage Group is one of the few national lenders with no overlays on government and conventional loans
• Over 75% of our borrowers are folks who could not qualify elsewhere due to their overlays

Consumers with over 700 credit scores, low DTI, 20% down payment, and no derogatory tradelines can qualify with any lender.

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Mortgage Process For Home Buyers: What Are Lender Overlays

However, not all buyers fit the above credit/income profile.

• Many hard-working Americans have gone through extenuating circumstances such as loss of a job, medical, divorce, or other hardship
• When consumers go through economic hardship, their income flow normally gets affected
• This, in turn, affects their abilities to make timely monthly debt payments
• Ultimately, it affects their credit and results is drop in their credit scores
• Borrowers with prior bad credit, housing event, bankruptcy, late payments, employment gaps, or other credit/income factors should interview lenders
• Choose a lender with no overlays on the particular loan program home buyers are interested in
• For example, veterans of U.S. Armed Services with 580 credit scores may want to choose a loan officer who represents a lender with no overlays on VA Loans
• The United States Department of Veterans Affairs (VA) sets VA Mortgage Guidelines
• VA does not require a credit score nor debt to income ratio requirements
• However, most lenders have 620 to 640 credit score requirements
• Most lenders have a debt to income ratio caps at 45% to 50% even though VA does not have DTI caps
• These lenders with minimum credit score and DTI caps are said to have lender overlays on VA Loans

Again, Gustan Cho Associates Mortgage Group has zero overlays on government and conventional loans.

Avoiding Stress During Mortgage Process For Home Buyers

The mortgage process for homebuyers does not have to be stressful. It should be an exciting time for home buyers and their families.

• The mortgage process for homebuyers should not take more than 30 days from the date the executed real estate purchase contract is submitted to the loan officer
• Unfortunately, a large percentage of home buyers experience serious stress during the mortgage process
• Over 75% of our borrowers at Gustan Cho Associates are folks who are stressing during their mortgage process with their current lenders or have just gotten word of a last-minute mortgage denial
• One of the most important factors home buyers need to research the loan officer and the lender they have chosen to avoid stress during the mortgage process
• Please note that the pre-approval process is the most important stage in the mortgage process for home buyers. Loan officers should never issue a pre-approval letter
• All pre-approvals should be fully underwritten and signed off by mortgage underwriters
• All of our pre-approvals at Gustan Cho Associates Mortgage Group are fully underwritten and signed off by our mortgage underwriters
• That is why we close 100% of all of our pre-approvals and there is no stress during the mortgage process and there are no last-minute loan denials

Homebuyers should never enter into a real estate purchase process without a pre-approval that has not been underwritten and signed off by mortgage underwriters. To start the pre-approval mortgage process for home buyers, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.