Fall is a time for foliage, pumpkins, and corn mazes. In fact, Vermont is home to New England’s largest corn maze, known as the “Great Vermont Corn Maze,” which stretches for 24 acres. But, just as a maze can be a confusing and winding path, so can the mortgage process. With the proper guidance, you can be prepared before meeting with a lender by knowing what they will ask, what you should ask, and what documents you should have ready. In this post, we will help you find your way through the complex maze of mortgage loan options, ensuring you choose the best path to homeownership.
How to Prepare Before Meeting with a Mortgage Lender
Perhaps you’re in the market for a new home and think it’s time to meet with a mortgage lender to know what you can afford. Before beginning the mortgage application process, taking proactive steps to prepare for your meeting with a lender is crucial.
The key is to assess your financial situation. To conduct an assessment, ask yourself these questions:
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Do I have a stable and predictable income?
Underwriters use stable and predictable income to determine the income used to qualify you for a mortgage. If you have less that a two-year history earning the same type of income, and your income fluctuates or is unpredictable, it can make it harder for you to qualify for a mortgage.
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What is my credit score?
Your credit score is a representation of your creditworthiness. While your credit score is dynamic and can change over time, it’s important to regularly monitor and take steps, if needed, toward improving your financial health.
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Should I save for a down payment?
A down payment contributes to your home equity, so the more you can save, the less you will need to borrow, and the lower your monthly payment.
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Does recurring debt affect my approval?
Recurring debt is debt that occurs monthly and generally show up your credit report. Some examples are credit cards, student loans, or car loans. Reducing recurring debt before applying for a mortgage is an excellent way to ensure your debt relative to your income is in line. Lenders use a measurement of debt to income to determine your ability to repay your debt. The lower your debt to income ratio, the more likely this will help you qualify for a loan.
Once you have assessed your financial health, avoid big purchases before entering the home-buying process, as it could impact your credit score or debt-to-income ratio and slow down the approval process.
Which Mortgage Is Best for You
With your financial health assessment complete, you’re ready to find a mortgage lender in Vermont and New Hampshire that can help you choose the right type of mortgage for your situation.
Types of Mortgages
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Conventional Fixed-Rate Home Mortgage:
A conventional fixed-rate mortgage provides a set interest rate and monthly payment that will remain constant over the life of the loan.
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Adjustable Rate Mortgage (ARM):
An ARM starts with a lower interest rate but will adjust over time, usually every year after an initial fixed-rate period.
Several government-backed loans are processed through lenders such as Union Bank but insured through the government at either the state or federal level.
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- Federal Housing Administration (FHA) loans are open to any buyer who meets the eligibility requirements. With an FHA loan, you can make a lower down payment, use gift money for your down payment and closing costs, and ask for the seller’s assistance.
- Veteran Affairs (VA) Loans are for eligible service members, veterans, and surviving spouses. With a VA loan, a down payment is not required.
- Vermont Housing Finance Agency (VHFA) is a not-for-profit organization that helps Vermont’s low- and moderate-income residents get affordable mortgages through participating lenders, such as Union Bank. They offer many types of programs, including the Vermont First Time Buyer Program.
- New Hampshire Housing Finance Authority (NHHFA) offers a variety of programs, including the New Hampshire First Time Buyer Program, designed to help first-time homebuyers in New Hampshire purchase a home through down payment assistance, low interest rates, and qualifying income limits.
Top lenders of VHFA and NHHFA, like Union Bank, with industry experience, can help you explore all types of mortgage programs that make homeownership affordable.
When to Find a Mortgage Lender
Given your newfound understanding of pre-qualification and pre-approval, it’s time to seek out a mortgage lender, as there may be a difference between the price you have in mind and the amount your mortgage lender will pre-qualify you for. It’s always best to spend less than you can, if possible. This gives you a cushion in your budget for the unexpected. It also protects you from becoming over-extended in which you spend so much on your home that there isn’t much left over for fun things like travel, dining out, and decorating your new home.
When looking to buy a house in Vermont or New Hampshire, it’s best to start looking for a mortgage lender like Union Bank before speaking with a real estate agent, as they will likely ask you if you have been pre-qualified or pre-approved. When you’re ready to make an offer, most sellers will want to know you’re a qualified buyer before accepting the offer.
You can start the process by applying online or setting up an appointment with one of our knowledgeable mortgage lenders.
What Documents to Have Ready for Your Mortgage Lender
You can speed up and streamline your mortgage application process experience by preparing the necessary documents your mortgage lender will require.
Use this helpful checklist to prepare:
- Proof of Income: Most recent two years W2s, most recent 30 days of pay stubs, child and/or spousal support, disability or VA benefits, pension, social security, and the most recent two years personal and business tax returns if self-employed.
- Identification: Driver’s license, passport, or other forms of government-issued identification.
- Bank Statements: Most recent 60 days of bank statements for your checking and savings account(s).
- Proof of Assets: Most recent two months of statements for any assets, such as investment accounts, retirement accounts, or vehicles.
- Down Payment: Gather proof of funds that you plan to use for a down payment, such as bank statements, investment account statements, or gift letter verifying gifted down payment funds.
What Should You Expect When Meeting with Your Mortgage Lender
We’re almost through the mortgage maze–you have a down payment saved, stable and predictable income, and a good understanding of your debt relative to your income. Now we can finish our path with what to expect when meeting with a mortgage lender.
There are many types of mortgage lenders, but seeking out a mortgage lending team from a local Vermont and New Hampshire bank like Union Bank will offer personalized, individual service.
The role of the mortgage lender is to help guide you through the mortgage process to achieve homeownership. To do this, they will take all your prepared documents, review your financial situation, assess your debt-to-income ratio, determine the downpayment needed, and find the right type of mortgage loan for you.
Be prepared for lenders to ask you detailed questions about the homes you’re looking to buy, such as:
Where are you looking to purchase a home? Lenders must be licensed to do business in the state you plan to buy.
How soon do you plan to purchase? The timeline helps lenders create a plan as more time may be needed to increase savings or improve your credit score.
What’s your price range? Having a price range in mind helps lenders set an ideal budget based on your financial information.
You also should be prepared to ask questions of your lender, such as:
What type of mortgage is best for me? Lenders should help you understand what mortgage programs are suitable for you and the pros and cons of each so you can make an informed decision.
What will my monthly payments be? Based on estimates for taxes and insurance, your lender will know the approximate maximum monthly payment in advance–though you certainly do not have to max out your monthly payment.
What will the rest of the process look like? An experienced mortgage lender is equipped to guide you through the process, and it’s less anxiety-inducing if you know what to expect.
Choosing a lender to work with can be the difference between getting lost in the mortgage maze and finding your way out. Experienced, local lenders who help you secure an affordable mortgage and respond quickly ensure your home-buying experience is seamless and rewarding.
Union Bank is ready to guide you if you’re in Vermont or New Hampshire and ready to take the next step. Reach out to our team today.
