The Mortgage Process

You are ready to buy. What’s next?

Your Guide to
The Mortgage Process.

RULE #1: NEVER START LOOKING FOR A HOUSE WITHOUT GETTING PRE-APPROVED BY A MORTGAGE LENDING PROFESSIONAL.

This is one fundamental mistake many people make. When they think they are ready to buy a property, they seek a real estate broker. A good real estate broker is very important in a transaction, however, your first point of contact before you start looking for a house should be a mortgage professional, because it is the mortgage professional who ensures the success of your transaction. He/she is the one who delivers funds to closing. Unless this is an all-cash transaction, your first conversation should be about financing. Here are some topics that should be addressed with your mortgage professional: 

Mortgage Pre-Approval

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About The Mortgage Process?

At Opportune, Inc., when you plan to buy or refinance your home, we recommend consulting with a team that has decades of experience. If you live Chicago, greater Chicagoland, or anywhere in Illinois, you should work with a trusted local lender that can help you with your home buying and refinancing process.

Top Income Questions for Buying a Home

  • Where is your income coming from?  
  • Are you a W-2 employee or self-employed? Both may have different requirements for documentation and/or qualifications based on underwriting guidelines  
  • Are you receiving overtime and/or bonuses?  
  • Do you have any additional sources of income? For example social security, a second job, dividends/interest, alimony, child support, etc.? 
When a mortgage professional analyzes your income, he/she will be able to determine your Debt to Income Ratio (DTI), which is used for qualifying purposes. The Debt to Income Ratio is calculated by dividing your total monthly obligations (mortgage payments, installment payments, credit card payments, alimony/child support payments, etc.) by your total gross monthly income. In most cases, you need a DTI below 45% but there are exceptions.  

Credit Considerations for A Mortgage

One of the most important components of your transaction is your credit score. Lenders order your credit report from three repositories (Equifax, TransUnion, and Experian) and take your middle score (not average) as the basis. Your credit score is tabulated based on many variables. While calculating methods are guarded by the credit bureaus, we do know that your score is inextricably tied to your payment history, how many new hard credit inquiries you have, the length of your credit history, how much you owe, a ratio of your outstanding revolving debts to your revolving debts credit limit, and many other factors.  

Your credit score will also be a determining factor in your interest rate.

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Understanding Your Assets in The Mortgage Process

Of course, it stands to reason that you will need money to buy a property. Most lenders assess your liquid assets, investments, and retirement accounts when determining your loan eligibility. When you purchase a property, you will not only need to show funds for the down payment but also reserves to cover your closing costs, tax and insurance escrow, etc. These assets may come from various sources, including liquid accounts (checking, savings, money market), investment accounts (401K, CD, stocks, mutual funds), gifts from relatives, closing costs credits from the seller, and other sources. There are also instances when assets can be used as income. This is when you are “asset-rich and income-poor.” 

Assets are a big factor in determining your down payment. There is a misconception that you can’t buy a house unless your down payment is 20% or greater, but the truth is there are special programs that allow certain buyer’s the option to put down as little as 3% or 3.5% down. Often, with some of these programs, your down payment can also come in the form of a 100% gift from a relative. This is why you need to talk to a qualified mortgage professional before searching for a property. Knowing your qualification status, and options for purchase will open doors you may have once thought closed. 

What Down Payment Do I Need For A Mortgage?

As mentioned above, the rule of thumb many years ago was that you needed a 20% down payment to buy a home. Thankfully, there are many programs where a 20% down payment is not required.  

Even with a conventional loan, you can now put down as little as 3-5%. FHA financing requires a minimum down payment of 3.5% and VA loans for current and former military members or their surviving spouses allow zero down payment.  

Here is an important factor to be aware of: any time your down payment is less than 20%, the lender will require you to purchase Private Mortgage Insurance or FHA insurance. It will add a few dollars to your monthly payment (as illustrated in the purchase scenario we ran above) but will allow for a much smaller down payment. Also, with conventional loans, your PMI will drop off once your equity exceeds 20%. 

There are programs for lower-income borrowers that make purchasing a primary residence a reality. Fannie Mae and Freddie Mac offer programs such as HomeReady and Home Possible, respectively, that have different income-requirements, allow for a smaller down payment and offer a range of sizable discounts for PMI and condo adjustments. These are terrific tools for first-time or income-restricted home buyers.  

Still not convinced?

Contact us for additional tips for refinancing your home.

Our Happy Customers

With over 50 five star reviews, our customer ratings speak for themselves. We’ve served hundreds of Chicagoland and Illinois clients and we’re excited to work with you.

I cannot sing their praises enough! Through Eugene's ingenuity and never-give-up attitude, he found creative solutions to help us obtain our first mortgage when every other loan officer we'd worked with prior, had failed to deliver. Now, we're on the second go around with Opportune, having just refinanced and couldn't be happier with the smooth process and amazing rate Eugene was able to secure for us. We love the team here -- responsive, caring and professional. We'll never go anywhere else for our financing needs and neither should you!
Tiffany Gabbay
Happy Customer
Loved working with Barb at Opportune throughout our mortgage process. She was careful to point out various details we may have missed as 1st time home buyers, connected us with appropriate lenders quickly and was with us every step of the way. Happy to report that we now have our own house, due to in no small part Barb and team. Kudos and thank you!
Arka Pattanayak
Happy Customer
It's no wonder there are only 5 star reviews here. I worked with Barb Patterson and she was absolutely fantastic!! As someone entering the home buying process with absolutely no idea of how much I could even afford she walked me through every step and fought for me to get the best possible deal. My closing team commented that the loan cleared faster than they've ever seen because of how well Barb handled everything. Cant recommend her enough!
Deanna Brackman
Happy Customer