How to Qualify for a Mortgage

You know, if you want to get a loan in today's world, they say that there's like seven steps to getting a loan. I'm going to see if I can do a shortcut. I'm going to walk right up to the bank window. I'm going to offer some money. I'm going to see if they're letting me sign on the loan today. Hi, I want to... I want to get a mortgage, a loan. Can I just give you some money and then like sign on a loan today? But could it be done today? Do you think it's gonna take a little longer? Do you think it's complicated? So you're telling me right now, if I want to put this money in this this box thing, you won't take it? It's okay. I'm turning dreams into reality. Turns out that trying to get a mortgage is a little bit more complicated if you want to work through the bank system. So, what I'm going to be doing in today's video is I'm going to share with you the seven steps to qualify for a loan. If you want to buy a property, what you're really doing is you're getting a mortgage. And here's the definition according to Investopedia. A loan that the borrower uses to purchase a home and agrees to pay back over time. Typically in a series of regular payments. The property serves as collateral to secure the loan. Let me tell you what I mean by that. Let's just say that I wanted to buy a home and that property was $300,000. Well, listen. Instead of coming up with $300,000, the bank will give you most of that money. If you're buying this home to live in for yourself, you might need a 3% down payment. And 3% on $300,000 is basically going to be 9 grand. If you can come up with 9 grand, guess what the bank will do? They'll put up the other $292,000. But if you want their money, you have to jump through their hoops. Now, you also got to understand that the mortgage holds the house as collateral. Meaning, the bank says, yikes. What happens if you don't make your payment? Well, we believe as a bank that there's intrinsic value in the house that we gave you for the loan. So, if you don't make your payment, we're going to take the house back and hope that there's some money left over for us. But in most cases, a lender does not want to end up with your house. The lender will scrutinize your financial situation to make sure that you are worth the risk. In other words, they want to make sure that if they give you some money like that, that you're going to be able to make your payments. Now, before I can share the 7 steps, first let's talk about the 2 different types of a loan. There's conventional loans and there's FHA loans. These ones are government-backed. Conventional loans are privately backed. And if we were to do a side-by-side comparison of FHA versus conventional, you'd find that FHA will actually lend you with the credit score as low as 580 versus conventional, a credit score of 620. Now, I would say that average credit is maybe like 680. Right now, I think I checked mine last night. The scores go as high as 850. I think with one of the credit bureaus, my score is like 823. But that's because I bought a lot of real estate and I have proven to be financially a good bet. So, you understand with FHA, on the one hand, they're willing to take you even with the lower credit score. And that means that they're more forgiving of past bankruptcies, short sales, foreclosures. The government really wants to see people own homes. It bodes well as an entire country for building stabilization. Understand with FHA, they want a 3.5% down payment. But with conventional, it's as low as only 3%. Now, that kind of makes sense. They expect a higher credit score. They're going to say, you're less of a risk. Let's put less money down. FHA says, you can have a worse credit score but we're going to ask you to put up just a little bit more money. Not that a half percent makes a huge difference. Now, FHA and conventional loans will allow you to co-sign. That means if there's a friend, a relative, a family member that wants to use their credit and say, hey, I'll make sure that this person is creditworthy. I'll even put my credit on the line. They're both going to allow you to do that. But FHA is even more lenient in what they will allow. And here's the bottom line. FHA is easier to qualify for but conventional is likely to be less expensive when you actually qualify for it. So, at the end of the day, it's pretty much sixes. A loan is a loan and more or less both will get you into a house. Next, you got to research your mortgage lenders. Like, do you want to go directly to a bank? Do you want to go to an online non-bank lender? Do you want to go to a credit union? And here's my advice. Whatever you do, you want to shop around to at least 3 institutions. Do you know why? They all tackle the process differently. Some might have higher fees, some might have lower fees. Some might actually have lower interest rates and other ones higher ones. Obviously, you want the lowest fees and the lowest interest rate. So, shop around a little. Now, everything I've shared with you so far is what you should be doing before you go and find a house including step number 3 which is get pre-approved for a home loan. In other words, you don't want to go shopping for a house unless you have a bank backing you up saying, yeah, I looked at this person's finances and they're actually qualified to get a house. So, understand that getting pre-approved makes you number one more appealing to sellers thinking, well, 2 people want to buy this house. One's pre-qualified, one's not. Hmm, I wonder which I should pick. They want to go with the person that can follow through and where they have more confidence that are going to get the loan. Also, it's going to help you figure out the real cost of the mortgage, right? Last thing you want is to get a home under contract, fall in love with it and then find out, what? This thing's going to cost us $500 more a month than I thought? If you want to get pre-approved, step number 4 is submitting your application. Which means most banks are going to ask for W-2 forms from your past couple of years. If you've had wages from a company, they want pay stubs from your past 30 days. They want your federal tax returns from the past 2 years. They want to see recent bank statements. See how much money you that you're keeping floating in there. They want details on long-term debts. Do you have student debts? Do you have vehicle debts? And then finally, they are going to want your ID, your social security number. And with that information, most banks within 24 hours can crank out a pre-qualification letter so that you can actually bid with confidence on a house. Ironically, I did not do it in that order. When I found the very first house that I was going to buy, I found it. I fell in love with it. I knew the price was right. And I crossed my fingers and I hope that I'd be able to get a mortgage. Truth is after I got it under contract, the first bank turned me down, the second bank turned me down, the third bank turned me down. And literally when I was about to give up, I finally found a bank. I literally feel so lucky that I was able to get that house. Because I walked into $40,000 of equity. More than double what I made in an entire year. And that first house became the first of thousands. And so, that's why I decided to write a book, The Straight Path to Real Estate Wealth. Where I actually document like I am here for it. Today's video is really just covering a little snippet of the entire process of how you make millions of dollars in real estate. Whether you're watching today's video for buying your own primary residence or you want to learn how to make a lot of money in real estate, this book is a gift that I'm giving you for free. Because I believe that knowledge is power. And so, if you click the link below, it's yours so you don't make any of my stupid mistakes like I was just telling you about. So, check it out. You're pre-approved and you found the house that you want to buy. So, now it's time to go through the rest of the loan process. You're now going to present the REPSI, the real estate purchase contract that you got from the realtor. You're going to bring it to the bank and say, Remember when I got pre-approved and they gave you all my financial stuff? Well, here's the house that I want to buy. And now, even if you were pre-approved to get a house, it really doesn't mean that you're technically approved. It just means that you pass the bank sniff test and they think that you'll probably qualify. Where it gets a little bit challenging is step 5. Now, it's got to go through this process called underwriting. Like imagine a computer system and a human being that are looking at your credit history, your debt to income ratio, your current debt obligations. And they're basically saying, is this person really able with their job and wages and credit and blah, blah, blah and obligations. Are they really going to be able to pay this mortgage? Will they faithfully, dutifully be able every single month to make that payment? Because 30 years is a long time, right? That's like 360 months. Chances are they're not even going to live in that house for 5 years let alone 30 years. Are we really making a good bet? While you were in process of getting your loan, let me share with you 3 things you can do to really screw things up and probably cancel the loan possibility. Number 1, switch jobs. If you switch jobs while you're in the process of buying a house, that could mix the entire lending process. Number 2, if you take out another line of credit like, you know what? Let's go and buy a brand new car. Oh, you know what? Gap was offering me like a 20% discount if I open up a credit card. All of those things can mess up your credit history. They can mess with your credit score. Or if you take on new debt, that could change your qualification. And the number 3, don't make any large purchases overall. Don't do anything that would show up on or reflect on your credit. If you were pre-approved with your credit looking one way, keep your situation that way until you actually finish that purchase process and get that permanent loan put in place. You know in this whole lending process, the underwriter might come back and ask for more things or more proof or more documentation. Is there anything else that you should be doing while that's happening? Well, there is. You're going to work through a title company and the realtor is going to help line up the purchasing of homeowners insurance through the title company. You're going to have to buy the lenders title insurance policy. You're going to have to purchase owners title insurance. You're going to have to review updated loan estimates. And then basically, you need to get your funds lined up if you're bringing 3% or 20% to actually close on property. These are the things that are happening while you're kind of in that waiting period. Now, don't let any of those words scare you. It's not like you have to like go search things online and call people and hustle to find those different policies. Reality is between the bank and the title company and the realtor, they're working as a team to make sure that all these documents get lined up. Because when it is closing day, you're going to sit at a table and have a big fat stack of documents that you're going to sign with a pen or honestly more post-pandemic. A lot of people are doing e-signatures or notaries or going to houses or meeting places. I mean, reality is you're still going to have to sign your name like a million times. But they've made it more convenient. Next. As you can tell, it is a lot of work to get a loan put in place. And often it's a 30 to 40 Fed day process. And for this to really close out, there's a lot of people involved. Your mortgage brokers involved. Your real estate agents involved. Your attorney if you have one is involved. The seller's attorney. A title company representing the seller. Man, all of these people have to come together and sign these documents. But that's what it takes to actually make a home go down. First time I bought a house and cleared $100,000, I thought, you know what? I get why this process is worth it. It's a total pain in the butt. But if you get paid to do it for doing it intelligently, this is like the dumbest and easiest way I've ever made money before. Listen, I hope today's video helped you get set up realistically for what it looks like to buy a home and go through the lending process. Lending is just one part of how you become a multi-millionaire in the game of real estate. Finding really good deals, using other people's credit, using other people's money, finding tenants or doing lease options. That's what I described in this book. You know, when I took $3,000 like 3,300 bucks and I parlayed that into 1.6 million dollars over 4 and a half years, I knew I had to write a book and show people how stupid easy this could be if you had the right formula. So, I've documented that formula. I call it the straight path to real estate wealth. And I'm using a really interesting spelling on the word straight because there's a lot of stupid crooked paths that lead people down the wrong financial roads. And real estate, there's a reason why 90% of all millionaires have done it through real estate. So, if you're curious about investing but don't have a copy of this book, definitely click the link below. I can also show you how to get the audio or Kindle or whatever version to help you digest it. But this book will change your life when it comes to how you see money. And also show you how to become financially free very, very quickly. Man, I was 23 years old trying to buy my first house. And I think my credit score... I had one score at 660 of the three. One at 670. One at like 690. And I had a hard time qualifying based on the fact that I wasn't making a lot of money. And fortunately, I went to enough banks until I got the right answer. Listen, if you are young or even older, if you want to learn how to build your credit while you're young or even in your 20s, click this video. Let me show you how to build your credit like a champ. It bodes well for building a society that is built on a built on. I just couldn't find the last half of the sentence. Let's just change angle and start with benefits.