Ready to purchase a new home?
The first step is to APPLY here or call us at 1-888-482-6395. Once you apply, you’re ready for pre-approval. A pre-approval helps you identify and resolve any potential credit issues.
Pre-Qualification vs Pre-Approval
A pre-qualification provides an estimate of the amount of money you can borrow, based on your current finances and credit score. It provides insight on what your mortgage options are and allows your lender to identify your unique needs and goals.
Pre-approval requires you to complete a mortgage application and requires your lender to perform a credit check. Once pre-approved, you will get a written commitment of the maximum amount of money you can borrow.
Are you a First-Time-Homebuyer?
Becoming a homeowner is as rewarding as it is complex. From finding the right type of mortgage loan, to budgeting for your new mortgage payment, there are plenty of questions to ask and even more tools to help you get prepared. At VanDyk Mortgage, we work diligently to make your home buying experience as enjoyable and stress-free as possible. By offering loan programs to first time home buyers, we provide valuable resources during this hectic and exciting time!
First-time home buyers are eligible for a variety of loan programs to assist with their first major purchase. Listed below are some loan program options we offer to help you start your home buying journey:
Frequently Asked Questions
Best for: First time home buyers
Information you will need to provide for pre-qualification:
- Income information
- Credit check
- Information about bank accounts
- Down payment amount and desired mortgage amount
The benefits of getting pre-approved is that it shows your seriousness as a homebuyer and your ability to secure a mortgage. Once you receive your pre-approval letter, it is valid for 90 days.
Best for: Buyers who find themselves in a competitive market
Information you will need to provide for pre-approval:
- Copy of pay stubs showing your income for the previous 30 days
- Credit check
- Bank account information or two of your most recent bank statements
- Down payment amount and desired mortgage amount
- W-2 statements
- Personal and business tax returns from the past 2 years
The first step to building and maintaining a good credit score is to first determine your standing. You can do this by obtaining a free copy of your reports from annualcreditreport.com. Once you have this information, carefully look over your report and take note of any errors that you find. These errors can then be disputed with the credit bureaus.
If you find that you have a below average credit score, it can be refreshing to know that most credit blunders disappear from your credit report every 7 years. For more information on understanding and managing your credit score, check out our Credit Clean-Up Guide.
How to successfully build your credit score:
- Secure credit cards
- College student credit cards
- Credit-builder loans
- Becoming an authorized user on a friend or family members credit card who is currently in good credit standing
- Have a long history of credit (start building credit early)
- Get a co-signer
- Pay regularly and on time. Set up automatic payments so that you don’t miss a loan or credit card payment.
- Maintain reasonable credit. Experts recommend keeping
credit at no more than 30% of your credit limit.
- Only apply for the credit you need. Think of it like a loan, only borrow what you need.
- Pay minimum monthly balance on time.
- Keep old credit cards open. Closing old cards can have a negative effect on your credit, so it’s best practice to keep them open even if you no longer use them.
These questions differ for different individuals, as we are all on our own unique home-buying journey. These are just some important questions to begin asking yourself as you navigate your mortgage loan options.
For a detailed list of the options we provide, check out our Mortgage Loan Options. If you are still unsure which program will best fit your needs, contact us and one of our loan experts will help find a program that best suits you!
- Credit & Credit History. Lenders will use your current credit and past credit history as an indicator of whether or not you will be able to repay your debt. They will look at how much you currently owe, how often you borrow, how often you pay your bills – and if you often pay them on time, as well as how well you live within your means. To check your credit score, visit annualcreditreport.com. For help with poor credit, check out our Credit Clean up Tips.
- Capital. Capital tells the lender how much money you, as the borrowers, have to spend on a down payment. This is crucial information as you begin your home buying journey and apply for a loan. Lenders are checking if you currently have the capital to cover new costs, or if you are borrowing from a friend or family member.
- Employment. Employment tells the lender approximately how long it will take you to pay back your debt. They will check things like your previous employment history, as well as your current employment situation. Lenders are looking for stability in your income, which tells them how consistent your payments will be.
- Collateral. Collateral protects the lenders in the case that borrowers are unable to repay their loan. This is equally important to lenders as credit, income, and employment, as it acts as a safety net in the unfortunate circumstance that the loan is unable to be paid.
By starting the pre-approval process early in your search, you can quickly identify potential hurdles and focus your energy on homes that are truly available to you. Once you have been approved, this contract is valid for 90 days.
If you would like to get an estimate of where you fall, use our online Mortgage Payment Calculator and Affordability Calculator for free.
A 30 Year Conventional loan requires a down payment of 5%, and as low as 3% for some first-time home buyers.
A Federal Housing Association loan, better known as FHA, has a down payment reaching as low as 3.5% and interest rates that are generally lower than conventional loans with the same terms.
The VA, or Veteran Loan, requires low interest rates with zero down payments and no monthly mortgage insurance.
It is important to note that small down payments come at a cost. FHA and conventional loans with down payments less than 20% require mortgage insurance, which protects lenders in the case that the loan is not repaid. Likewise, VA loans require a funding fee, which you can choose to include in your monthly loan payments. Choosing a mortgage program with a low-down-payment may be the best option for you, but it is important to keep in mind that the lower the down payment, the higher the interest rate.
For more information on our different loan programs, please refer to our Mortgage Loan Options page.
- Create a goal. The first step in any money-saving plan is to create a goal. To determine this, it is helpful to first decide which mortgage loan program is right for you. See our full list of Mortgage Loan Programs and the down-payment amount required for each above. Once you have this number, you are ready to start working towards your goal.
- Implement money-saving techniques.
- Set up automatic transfer to savings account. This can be done through most banks and takes much of the effort out of saving.
- Save unexpected income such as bonuses or raises.
- Save tax refunds.
- Apply for a credit card with cash rewards.
- Don’t take on any new unnecessary expenses, such as a new car payment or car lease. Try to eliminate expenses that you can.
- Refinance your student loans.
- Take advantage of first-time home buyer programs. These are state-specific so make sure you know what is available to you based on your geographic location.
- Put your money in a high-yield savings or money market account. These accounts can accumulate interest while remaining liquid enough to be accessed at any time. Another option would be to open a CD, or certificate of deposit. This option will allow your money to accumulate more savings than if it were in a high-yield or money market account. However, it is inaccessible to you for a period of time and has a penalty to open. This is a good way to save money that you do not see yourself needing in the near future.
nevitable and should be included in the total cost of your new home.
- Down payment. The cost of the down payment is one of the most well-known costs that goes into purchasing a home, and one that is typically the first expense a homebuyer will begin to save towards. Down payments vary depending on what type of mortgage you choose. To see the different mortgage loan programs and down payment costs associated with those, visit our Loan Options page, or contact one of our loan experts directly today.
- Closing costs. These costs, which begin to accrue as soon as you start the home buying journey, can often become overlooked, but are extremely important to budget for. These can include, but are not limited to; the application fee, origination and/or underwriting fees, title insurance, title search fee, and in some cases a transfer tax.
- Move-in expenses. From hiring a moving truck to purchasing cleaning supplies, moving expenses are inevitable and should be included in the total cost of your new home.
- Insurance. There are two types of insurance to consider when purchasing a new home.
- Homeowner’s insurance. This type of insurance protects you from unexpected damages to your home such as effects from a natural disaster, theft, or vandalism, to name a few. Though this insurance is not required by law, it is highly recommended and can be required for some lenders.
- Private Mortgage Insurance. PMI or private mortgage insurance is required when a homebuyer puts down less than 20% for their down payment. This insurance provides protection for the lenders if the buyer defaults on their loan. It’s helpful to note that this insurance does not last the lifetime of the loan and is eventually eliminated as the buyer pays down their mortgage.
- Property Taxes. These taxes, that are often included in your monthly mortgage payments, vary in geographic location. These are a variable cost that is not always based on the initial price you paid for your home. Meaning, they change over time, as the value of your home changes. Some possible reasons for an increase in property taxes would be a home improvement to you or a neighbor’s home, or the development of a new school.
- HOA. HOA, or homeowner’s association, fees are applicable when buying a home or condo in a community that is run by a homeowner’s association. These fees are used towards services provided by the association such as security, maintenance, landscaping, and amenities like a pool or a gym. These also vary from place to place.
- Home maintenance, repairs, and utilities. Having a fund available for things like maintenance, repairs and your new utility bill is always a good idea when purchasing a new home. Some experts suggest saving 1% of the home’s value as an emergency maintenance fund in the case that these almost certain expenses arise.
Putting even a small amount of money away is a good idea, but if you find it difficult to work towards an undefined goal, it could be helpful to look at homes in the area that you will likely buy. Here, you can compare prices in the market, research mortgage options for you, and start to get an idea of how much you will need for a down payment.
Please refer to our full list of ‘Costs to Consider’ above.
Property taxes increase when the states government offers a service, like repairing the roads, building a public park or a new school. This is also an important thing to plan when deciding where you plan to purchase your home.
- Pre-Approval. The first stage is to apply for a pre-approval, which will give you an idea of what you can truly afford. For more information on this, it is helpful to refer to our Pre-Approval Document Checklist.
- Submit an application. After your offer has been accepted, you’re ready to submit your application! At VDM, there are 3 ways to apply: Online, over the phone, or in person. Some documentation, such as a government-issued photo ID, home address and income are required at this stage. For a full list of required documentation, please refer to our Application Checklist in the Loan Survival Guide.
- Loan Submission. Once your application is complete, your loan package will be sent to a Loan Processor who will verify all the necessary documents have been received. If they have, all documentation is sent to underwriting for approval.
- Conditional Approval. At this stage, underwriting has reviewed and your loan is conditionally approved based on the receipt of possible additional documentation needed to clear your loan for closing.
- Final Approval. A loan processor has reviewed the conditional documentation for completeness and sends them to back to underwriting for final approval. At this stage, your loan officer prepares you for the closing process.
- Closing. A title company or closing attorney prepares documents which are reviewed and signed by you. And… voila! You’ve just become a homeowner! Congratulations and welcome to your new home!
- Pest Inspection. It is best to ensure these issues are resolved before escrow closes, in the case that further action needs to be taken by either the buyer or the seller.
- Low Appraisal. In the case of a lower-than-expected appraisal, the seller may have to lower the selling price, or the buyer will have to pay the difference in cash. We think it is always a good idea to get a second opinion.
- Claims to the title. Title insurance protects both the buyer and lender against claims on the property. If there is in fact a lien or a claim, this will have to be resolved before the transaction can move forward. By performing a title search, you can ensure that no party – including the IRS, state or relative of the seller – has any legal claim to the property.
- Home Inspection Defects. Most individuals sign a home inspection contingency which allows the purchaser to back out of a deal without penalty in the case that there is a major defect in the home inspection. If a contingency is not put in place, the purchaser can lose the entirety of their earnest money down. If the sale proceeds, there may be a delay due to the time taken to go through negotiations.
- Buyer or Seller Doubt. Having cold feet is a very real phenomenon, and one that can certainly delay the closing of the purchase of a home. Unless there is a legitimate reason to back out of the purchase, i.e., not waiving a contingency or a deadline not being met, the buyer will lose their earnest money should they decide not to go through with the sale. This compensates the seller for the time that the property was taken off the market and missing out on other possible offers. In the case of a seller having cold feet, the buyer is eligible for damages from the seller.
- Financing Falls Through. It is best practice to get pre-approved, in the very beginning of your homebuying journey, to secure the best mortgage loan program for you. However, there are cases, such as, a drastic increase in interest rates, a change or loss in employment, or a decrease in credit score, when financing falls through. If this happens, the homebuying process can be delayed or even stopped altogether.
- High Risk Location. In some locations, homes may require Hazard Insurance. By requesting a National Hazard Disclosure Report, the buyer can see if any national hazards in the area will affect their home. Hazard Insurance is often greater than homeowner’s insurance and can certainly delay the closing process. To avoid this, you can ask your agent or city planner about national hazards in your area.
- Survey Issue. Before closing on your home, a qualified land surveyor will draw up the boundary lines for your property. In the case of an infringement, either by a neighboring tree or fence, you may have to hire an attorney to facilitate a lot line agreement.
- Paperwork. Real estate professionals provide assistance with all the necessary paperwork and disclosures required in today’s heavily regulated environment. Their expertise can help save time by avoiding common errors made by those who are unfamiliar with the laws and regulations.
- Experience. Highly educated and with years of real estate experience, a professional knows the ins and out of the entire sales process, saving you both time and unnecessary distress.
- Negotiations. Real estate professionals often act as “buffer” in negotiations with all parties throughout the entire transaction. Which can be helpful and even necessary when negotiations become more complex.
- Pricing. Lastly, real estate professionals can look to their understanding of today’s market when setting an offer price. Not only do they have the years of experience behind them, but they also have access to online tools and resources that are only available to industry professionals.
- Build Equity. When you make the decision to purchase a home, you are making a great financial investment. As you continue to make your mortgage payments, you will continue to build equity, which is a considerable asset that can provide assistance with almost any future financial need.
- Tax Advantages. Both the interest on your mortgage and your real estate taxes are tax deductible, which is not the case when you rent.
- Freedom and Control. Owning your home provides you the freedom and control to make any wanted changes, such as updates or renovations.
- Stability. Fixed rate mortgage payments, often provides financial stability, as opposed to rent which can increase as when you sign a new yearly lease.
- Pride and Sense of Community.
Many take pride in owning a home, as an asset and an expression of your own personal style. Owning a permanent residence can also build a sense of community amongst fellow homeowners within your neighborhood.
For a Traditional Mortgage Loan, one that requires a down payment of at least 20% of the purchase price, the escrow account is closed after all documents are carefully read and signed.
For loans that require a down payment of less than 20%, such as FHA or some 30-Year Conventional Loans, you are required to keep the escrow account open to cover expenses like property taxes, homeowner’s insurance, and mortgage insurance premiums.