Buying a home is a very long and complicated process especially for first-timers. Many people consider buying a home with a mortgage which is probably the largest purchase they will make in a lifetime. According to statistics, the total mortgage debt in the USA was estimated to be about $16.01 trillion in 2019 only. As it is a big financial investment, there are many things you must take into account before you buy a house. With all the people and red tape involved, you must take the time to understand the entire process so it goes as smoothly as possible.
If you are a first-timer, a mortgage is a loan that is taken out to buy land or property. You are given a certain amount of money you need to buy the home and you must pay back the loan over a period of several years. However, if you stop making the payments on your mortgage, the lender who gave you the loan can take possession of your home. This may seem confusing, but don’t be discouraged. According to the statistics by the California Association of Realtors, a number of factors including low mortgage rates are pushing up sales and prices, making the home prices in metro LA to rise 28.8% and 71.1% in LA County since June 2020. In order to better understand how the entire process works, we are giving you a step by step guide on how to get a mortgage for your new LA home.
Get your finances in order
The first and most important step is checking your finances. This refers to working out what you can afford. Think about all the additional costs you will need to pay once you own the home such as household bills, insurance and maintenance. The point is not to struggle with keeping up with your payments. Before applying for a mortgage, the lender will check your income and credit score in order to determine whether you are qualified for a mortgage loan. The higher the credit score you have, the better the chances you have of getting one. So, they check how much debt you have compared to your income, and the better debt-to-income (DTI) ratio you have, the better mortgage terms you will get.
Pick the right mortgage
After getting your finances in order, the next step is to choose the right mortgage. Since you will be buying a home in LA, you can look for the best Los Angeles mortgage brokers to help you compare different mortgage options. During the pre-qualification and pre-approval process, the lender will explain the different types of loans. All types come with fixed or variable interest rates. The lender usually advises you which mortgage type is the best option for you based on your finances and your goals. For example, if you have a bad credit score or can’t afford a big down payment, then the best option for you is the conventional or government-backed loan. Fixed-rate mortgages are probably the safest because the interest rate for this type won’t change over the lifespan of the loan. Also, you can decide on the mortgage term whether you want it to be over 10, 20 or even 30 years. However you decide to do it, make sure you don’t borrow more than you can afford because you don’t want to end up going into debt with higher interest rates.
Choose your team
The mortgage process primarily involves two parties, the borrower, which is you, and the lender. As you know by now, the lender is the person who sponsors your loan to purchase the property and creates your mortgage. One reputable choice is the bank because it is regulated by the state. Another example is a mortgage broker which acts as an intermediary connecting you as a borrower with the lender, that can come in handy in your LA home purchase. Before you decide who you will choose as your lender, make sure you check with different ones about the terms they offer. A third person who must be part of your team is the real estate agent. Find someone who you can trust because they will walk you through the pros and cons of the entire home buying process. You can ask your family and friends for recommendations or look for real estate agencies. Remember to look for an experienced realtor who will be just as engaged as you to make this process go smoothly.
Find your home
After you have gone through all the paperwork and have chosen your team of professionals, the fun part can begin and that is going house hunting. Your real estate agent should be by your side searching the market to find what you are looking for. Depending on the location of the home, the amount people pay for affordable housing varies in LA due to the location of the home. So, the job of the realtor isn’t only helping you find your perfect home, but also negotiating the price and handling all the paperwork. While searching, you must make a list of how you want your new home to look like. This includes the type and size of the home, the neighborhood area and the expenses that you will need to pay for maintenance. This is very important because you need to be able to pay all expenses and mortgage on time. Remember not to choose the first one you see. If you schedule more than two viewings in one day, it is recommended that you take notes to make an educated decision of which home you want.
Close on your home
The final step is closing on your home. Once you’ve found your perfect home in LA, it is time to make the purchase. With the help of the real estate agent, you will make an offer and submit it to the seller. When the seller accepts your offer, you can finally close on your home. During this phase, make sure that all of your offer terms are met so the closing isn’t delayed. Bring all the paperwork from the beginning of the process on the closing day to verify that everything is in check. After signing everything, the escrow agent comes in who officially registers your mortgage and property deed. You will pay your down payment and closing costs and sign the papers. From this point on, all your house payments will go straight to the lender and you will officially be a homeowner. It will be a very long day but remember that you will be going to your new home to celebrate.
The entire home buying process can be very exhausting, but when you are surrounded by professionals, nothing should seem stressful. Even if you don’t understand something, ask questions. With all the paperwork involved, you can easily get confused. Make sure you follow these steps and try to enjoy the whole process as much as you can.