The mortgage expert’s guide to buying your first home: Getting approved

Number three in a four-part series.

By Justin Walseth, Vice President – Mortgage Department Manager
First International Bank & Trust, Member FDIC

Read Part 1: Setting Your Budget and Part 2: Pre-qualification Process

You’ve found a nice three-bedroom in your dream neighborhood. Your pre-qualification letter helped prove to the sellers that you are serious about buying, and they accepted your purchase agreement. Yippee! Next step to buying your first home– the mortgage approval process.

I like to joke that in the past you only needed a pulse to get a mortgage and now you need a blood sample. This is an exaggeration, of course, but the truth is that patience and communication are keys to the home buying process. It is my job to get you to closing, so lean on me for help and reassurance when you need it.

Here’s what you can expect in this part of the home buying process:

Application

First, the paperwork: your lender will provide you with a formal application or contract to complete. You will need to submit your personal financial documents (or update them, depending on the amount of time that has elapsed since pre-qualification), determine which, if any, loan programs you may take advantage of, and sign a variety of disclosures.

Locking in

The mortgage interest rate will be one of the most important variables in this process, and you need to determine during application whether you will lock in the current rate or hold off a while in hopes of a better deal. Interest rates are very volatile, and there is no guarantee waiting will be in your favor, but you can wait until up to seven days prior to closing to lock-in the interest rate.

87506107

Four steps to approval

Now, the heavy lifting shifts to the mortgage expert and other service providers. There are four boxes that need to be checked in order for your application to be approved.

  1. Title work. This is basically making sure that the person selling the house actually has the legal authority to do so, without any liens or conditions on their ownership.
  2. Appraisal. Is the house worth what the seller wants for it? If it isn’t, the bank may decrease the amount of money it is willing to loan. At that point, you will need to renegotiate or back out of the offer.
  3. Homeowners insurance. Bottom line: you need it, and we have agents that can help.
  4. Credit approval. The fancy word for this is underwriting. Because the decision-making at First International Bank & Trust is local, I know where your application is every step of the way.

Problems, though rare, may arise in any step of the process, so like I said before – be patient. Expect to supply paperwork a few times and answer some odd questions. It is normal for your lender to come back to you three or four times for clarification or additional information. And don’t forget about our online mortgage resources for additional assistance.

With any luck, your patience will pay off and your mortgage will be approved! Now all that stands between you and your first home is closing. We’ll pick up there next time.

Justin Walseth, Mortgage Expert

Justin Walseth is a mortgage expert in Fargo with more than 10 years of mortgage lending experience. He graduated from MSUM with a degree in Finance and Economics. When he’s away from work he enjoys golf, basketball and tennis as well as spending time with his wife and two children. 

The mortgage expert’s guide to buying your first home: The pre-qualification process

Number two in a four-part series.

By Justin Walseth, Vice President – Mortgage Department Manager
First International Bank & Trust, Member FDIC

After setting your budget, and maybe even before you identify the home of your dreams, the next step for a first-time homebuyer is the pre-qualification process. Pre-qualification is a non-binding agreement from your lender that you can borrow up to a certain limit, and happens before the formal application process.

Getting the big picture

First, you’ll need to provide information that helps us understand your total financial picture. This includes:

  • Personal identification for you and any co-owners, such as a spouse. Things like your full name, date of birth, social security number and previous addresses are standard.
  • Credit score and history (we pull this for you). Credit score is important, but it is one of multiple factors in the pre-qualification process – so if your score isn’t great, don’t panic!
  • Information about your income, debt and other assets.

Because every situation is unique, don’t be surprised or offended if we ask you for some additional information. And if you have any questions, you can always call us or visit our online mortgage resources.

banker

Running the numbers

First International uses a robust electronic underwriting system that requires a minimal amount of information from you and allows us to determine your eligibility and interest rates almost immediately.

Your eligible interest rate is also based on a number of factors:

While your final interest rate will not be determined until after the complete application, verification and final underwriting process – and you have locked it in – this process provides a good benchmark.

A common misperception when it comes to interest rates is that the bigger banks can negotiate lower interest rates for their customers. This is simply not true!

What if I don’t get pre-qualified?

Unfortunately, there are circumstances where an individual gets turned down for a loan. As your lender, we use this opportunity to help you address the issue head-on. Whether you need to establish a credit score, eliminate debt or save more, we can talk to you about strategies that will help.

The letter

The goal of pre-qualification is to walk away with a non-binding pre-qualification letter stating that, barring any significant changes to your financial situation, you can indeed afford the home of your dreams. This letter can give you a leg-up on other homebuyers because it signals to the home owner that you have the means and are serious about buying. So congratulations! You’re one step closer to ditching the apartment.

Justin Walseth, Mortgage Expert

Justin Walseth is a mortgage expert in Fargo with more than 10 years of mortgage lending experience. He graduated from MSUM with a degree in Finance and Economics. When he’s away from work he enjoys golf, basketball and tennis as well as spending time with his wife and two children. 

The mortgage expert’s guide to buying your first home: Setting your budget

Number one in a four-part series.
By Justin Walseth, Vice President – Mortgage Department Manager
First International Bank & Trust, Member FDIC

First time home buyers are some of my favorite people to work with. Taking the leap from renter to owner is a significant event in an individual’s or family’s life, and I am honored to be part of it.

Along the way, I’ve learned things that will help you, too. Check out these considerations about what type of first home you can afford:

1. Prevent payment shock: Know before you look

The first step in buying your first home is setting your budget. Before you even begin looking at homes or engage a realtor, you really need a sense of what kind of home you can afford. Understanding your budget helps prevent what I call “payment shock.” No one wants to experience that.

First Home

2. Set your home budget

The basis of a budget is your income, so take a close look at your take-home pay on a monthly and annual basis. This includes salaries, bonuses, commissions, and if you are entering into a mortgage with a co-owner, his or her income as well.

3. Find your numbers

Then we can talk about the two main components of a housing budget – your monthly payment and the down payment.

When setting a monthly budget, a good place to start is with current expenditures. How much are you paying for rent, on a monthly basis? Then, think about how much you would feel comfortable spending – and remember that there are typically a number of extra expenses associated with owning a home. Utilities, maintenance, insurance and special assessments are all important parts of a homeowner’s monthly budget that may be new to you.  Keep in mind that determining what you are comfortable spending is a very personal decision and may be different than what you can afford on paper. So don’t rush.  For help, check out our Rent vs. Buy calculator.

The second factor – down payment – can really scare people off, but it shouldn’t. It is a common misperception that you need a significant down-payment (think 20 percent) in order to purchase a home, and that is simply not true. In fact, there are a number of programs out there to help individuals secure a home with a minimal down-payment and a fixed interest rate. The Federal Housing Administration (FHA), Veterans Administration (VA) and state agencies like the North Dakota Housing Finance Agency (NDHFA) can be a great resource. Some of these programs have no income limitations and you don’t even need to be a first-time buyer. Your mortgage expert can help you evaluate your options.

After establishing a budget that you’re comfortable with, you’ll need to get pre-approved. We’ll talk about that next time.

In the meantime, visit our mortgage page for more resources to help you determine if you’re ready to buy

Justin Walseth, Mortgage ExpertJustin Walseth is a mortgage expert in Fargo with over 10 years of mortgage lending experience. He graduated from MSUM with a degree in Finance and Economics. When he’s away from work he enjoys golf, basketball and tennis as well as spending time with his wife and two children.