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For over 25 years, Churchill Mortgage has helped Dave's listeners purchase or refinance their homes and work their way through the Baby Steps to financial peace.
To begin the mortgage process, you’ll need to meet with a lender and be prepared to provide proof of:
It’s likely your lender will approve you for more money than you should borrow. Just because you qualify for a big loan doesn't mean you can afford it!
A good lender will clearly explain your mortgage options and answer all your questions so you feel confident in your decision. If they don’t, find a new lender. A mortgage is a huge financial commitment, and you should never sign up for something you don’t understand!
If you’re ready to get prequalified for a mortgage loan, we recommend talking with Churchill Mortgage.
The answer is, yes! If you apply for a mortgage without a credit score, you’ll need to go through a process called manual underwriting. Manual underwriting simply means you’ll be asked to provide additional paperwork—like paystubs and bank statements—for the underwriter to review. This is so they can evaluate your ability to repay a loan. Your loan process may take a little longer, but buying a home without the strain of extra debt is worth it! Keep in mind, not having a credit score is different than having a low credit score. A low credit score means you have debt, but having no credit score means you don’t like debt!Related: The Truth About Your Credit Score
Not every lender offers manual underwriting. Do a little research on the front end to find the ones in your area that will.
A quick conversation with your lender about your income, assets and down payment is all it takes to get prequalified. But if you want to get preapproved, your lender will need to verify your financial information and submit your loan for preliminary underwriting. A preapproval takes a little more time and documentation, but it also carries a lot more weight when you’re ready to make an offer on a home.
Buying too much house can quickly turn your home into a liability instead of an asset. That’s why it’s important to know what you can afford before you ever start looking at homes with your real estate agent.
We recommend keeping your mortgage payment to 25% or less of your monthly take-home pay. For example, if you bring home $5,000 a month, your monthly mortgage payment should be no more than $1,250. Using our easy mortgage calculator, you’ll find that means you can afford a $211,000 home on a 15-year fixed-rate loan at a 4% interest rate with a 20% down payment.
We recommend putting at least 10% down on a home, but 20% is even better because you won’t have to pay private mortgage insurance (PMI). PMI is an extra cost added to your monthly payment that doesn’t go toward paying off your mortgage.Saving a big down payment takes hard work and patience, but it's worth it. Here's why:
With so many mortgage options out there, it can be hard to know how each would impact you in the long run. Here are the most common mortgage loan types:
We recommend choosing a 15-year fixed-rate conventional loan. Why not a 30-year mortgage? Because you’ll pay thousands more in interest if you go with a 30-year mortgage. For a $250,000 loan, that could mean a difference of more than $100,000!
A 15-year loan does come with a higher monthly payment, so you may need to adjust your home-buying budget to get your mortgage payment down to 25% or less of your monthly income.
But the good news is, a 15-year mortgage is actually paid off in 15 years. Why be in debt for 30 years when you can knock out your mortgage in half the time and save six figures in interest? That’s a win-win!
Before you lock in an interest rate, it’s worth knowing that high interest rates bring higher monthly payments and increase the amount of interest you’ll pay over the life of your loan. In contrast, a low interest rate saves you money in both the short and long term.
Here’s what the typical monthly mortgage payment includes:
If you want to pay more on your mortgage, be sure to specify you want any extra money to go toward the principal only, not an advance payment that prepays interest.
Getting preapproved for a mortgage is just the beginning. Once the financial pieces are in place, it’s time to find your perfect home! While it’s one of the most exciting stages of the process, it can also be the most stressful. That’s why it’s important to partner with a buyer’s agent.
A buyer’s agent can guide you through the process of finding a home, negotiating the contract, and closing on your new place. The best part? Working with a buyer’s agent doesn’t cost you a thing! That’s because, in most cases, the seller pays the agent’s commission. Through our Endorsed Local Provider (ELP) program, our team can match you with the top real estate agents we recommend in your area.
A home loan designed to be paid over a term of 15 years. The interest rate remains the same for the life of the loan. A 15-year mortgage will have a higher monthly payment but a lower interest rate than a 30-year mortgage. Because you pay more toward the principal amount each month, you’ll build equity in your home faster, be out of debt sooner, and save thousands of dollars in interest payments.
A home loan designed to be paid over a term of 30 years. The interest rate remains the same for the life of the loan. A 30-year mortgage will have the lowest monthly payment amount but usually carries the highest interest rate—which means you’ll pay much more over the life of the loan. Unless you like the idea of paying thousands of dollars more for your home than you have to and staying in debt twice as long as you need to, opt for a 15-year mortgage if you’re not paying cash for your home.
A home loan designed to be paid over a term of 30 years. The interest rate does not change for the first five years of the loan. After that time period, however, it adjusts annually based on market trends until the loan is paid off. The interest rates are usually comparable to a 30-year mortgage, but ARMs transfer the risk of rising interest rates to you—the homeowner. Right now, interest rates are incredibly low, and they have been for some time. But once rates start to adjust, there’s a 50% possibility they will go up!
A monthly mortgage payment is made up of many different costs. Our mortgage calculator’s payment breakdown can show you exactly where your estimated payment will go: principal and interest (P&I), homeowner’s insurance, property taxes, and private mortgage insurance (PMI).
Don’t know which mortgage is right for you? Use our mortgage calculator to estimate the cost of different loan types and compare interest paid for a 15-year mortgage and a 30-year mortgage. You may be surprised to see how much you can save in interest by getting a 15-year fixed-rate mortgage.
Considering what to offer on a home? Change the home price in the loan calculator to see if going under or above the asking price still fits within your budget.
You can also use our mortgage payment calculator to see the impact of making a higher down payment. A higher down payment will lower your monthly payments not only because it reduces the amount of money you borrow, but also because it can help you qualify for a lower interest rate. In some cases, a down payment of at least 20% of the home’s purchase price can help you avoid paying private mortgage insurance (PMI).