A Step-by-Step Guide to Securing a Mortgage
The process of looking at houses is not difficult for most home shoppers. Many people enjoy touring properties and imagining their future in a new home. The more intimidating and labor-intensive part of the homebuying process is the mortgage application. How difficult and uncomfortable the process feels often depends on the lender you work with.
At Ouachita Valley FCU, we’re committed to walking our members through every step and making the process as smooth as possible.
Step 1: Assess Your Financial Readiness
Before applying for a mortgage, take a close look at your finances. Lenders consider several factors to determine your loan eligibility, including:
Credit score – Higher scores generally qualify for better interest rates.
Debt-to-income (DTI) ratio – Lenders prefer a DTI below 43%, meaning your total monthly debts should be less than 43% of your gross income.
Savings for a down payment – While some loan programs allow for low or no down payments, having more saved can reduce your monthly costs.
Stable income and employment history – Consistent earnings demonstrate your ability to make mortgage payments and reassure lenders that you will continue making payments decades into the future.
People in Northeast and North Central Louisiana who are interested in buying a home in the near future can increase the likelihood of approval by trying to pay down debts and build their savings. If you’re thinking about changing jobs, it may be best to wait until after your home purchase is finalized.
Although having a significant down payment saved isn’t always a strict requirement, it can significantly reduce your total principal and the amount of interest you’ll need to pay over the life of your mortgage.
Step 2: Determine How Much You Can Afford
It’s important to set a realistic budget before house hunting. Your mortgage payment will include principal, interest, property taxes, homeowners insurance, and possibly private mortgage insurance (PMI).
One commonly recommended exercise for determining how much house you can afford is the 28/36 rule:
Your mortgage payment should not exceed 28% of your gross monthly income.
Your total debt obligations (including the mortgage) should stay below 36% of your gross income.
Many credit unions, including Ouachita Valley FCU, offer online mortgage calculators to help you estimate monthly payments based on different loan amounts and interest rates.
Step 3: Explore Mortgage Loan Options
There are several types of mortgages available, each designed to meet different financial situations and homebuying goals. The most common options include:
Fixed-Rate Mortgages – These loans have a set interest rate for the entire term, providing predictable monthly payments.
Adjustable-Rate Mortgages (ARMs) – ARMs start with a lower fixed rate for an initial period, then adjust periodically based on market conditions.
Government-Backed Loans – Programs like FHA, VA, and USDA loans offer benefits such as lower down payment requirements or flexible credit criteria for qualifying borrowers.
Conventional Loans – These loans aren’t backed by the government and typically require stronger credit and a higher down payment but may offer more flexibility in loan terms.
Many home shoppers are eligible for multiple loan types, so it’s often helpful to work with a mortgage specialist who can explain your options and which might be right for you.
Step 4: Get Pre-Approved
Mortgage pre-approval is virtually a requirement for homebuyers planning to finance. Most importantly, it allows you to enter the homebuying process with a clear price ceiling. Secondly, it shows sellers that you’re a serious buyer. Real estate professionals and home sellers may not work with you without proof of pre-approval.
During pre-approval, a lender will review your credit history, income, and financial documents to determine your loan eligibility. To get pre-approved, you’ll typically need to provide:
Recent pay stubs or proof of income
Tax returns and W-2 forms from the past two years
Bank statements
Credit history review
Step 5: Find the Right Home
With a clear budget in mind and pre-approval in hand, you can start searching for a home that meets your needs. Consider:
Location – Proximity to work, schools, and amenities.
Home condition – Some properties may require repairs or updates. If you’re looking for a move-in ready home or don’t have much of a budget for repairs, you may want to limit your search to homes in good condition.
Property taxes and HOA fees – Make sure you take these regular costs into account when calculating your housing budget.
Once you find a home you love, you submit an offer. If accepted, the home goes under contract, and the mortgage approval process begins.
Step 6: Complete the Mortgage Application and Underwriting
After your offer is accepted, you’ll finalize your mortgage application. The lender will conduct a detailed review, which includes:
Home appraisal – Ensures the home’s value aligns with the purchase price.
Final credit check – Confirms your financial stability.
Title search – Verifies the seller’s legal ownership and checks for property liens.
This stage may require additional documentation, so be prepared to respond quickly to lender requests.
Step 7: Close on Your Home
Once your home loan is approved, you’ll receive a Closing Disclosure outlining your final loan terms and closing costs. You’ll review the document and attend the closing meeting to sign all necessary paperwork. After making your down payment and signing your mortgage, you should receive the keys to your new home.
Start Your Mortgage Journey with Ouachita Valley FCU
No lender can guarantee their mortgage application process will be easy. It is an unavoidably complex process that’s designed to protect both the borrower and lender. How painful or overwhelming it feels depends on the lender you work with. Banking with a credit union that knows you and is committed to your financial well-being offers a variety of benefits, including loan assistance.
We care about our members and go the extra mile to help them through the mortgage process. Take advantage of personalized guidance, competitive rates, and loan options that fit your financial goals. Call us at 318.387.4592 or find out how you can become a member.
