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Getting a Home Loan in Beloit, Wisconsin

Congratulations on wanting to take the plunge and become a first-time homeowner in Beloit. Maybe you’ve already done some looking. And just maybe you’ve started wondering how you’re going to afford that dream home. The fact is most people don’t buy a home outright with all their own cash. Typically, you save up enough to make a healthy down payment and then borrow the balance from a lender in the form of a home loan. The amount you borrow is called a mortgage, and you’re responsible for making monthly mortgage payments to pay the loan back.

lender holding a key as borrower signs document

Lenders, of course, are very careful about loaning big sums of money. The home loan application process is intensive because lenders want reassurance that the individual will pay the money back in a responsible and timely manner. That said, before you apply for a home loan, it’s smart to be prepared to prove you’re a good risk.

Preparing for the Home Loan Process

It’s highly recommended you take the following steps before applying for a home loan:
1.  Carefully document your monthly income, assets and debt payments with:
  • Two weeks of pay stubs if you have an employer, OR if you’re self-employed, two of your most recent tax returns or 1099s to show proof of your income.
  • Documentation of any assets (savings balances, investment accounts, retirement accounts, stocks, etc.).
  • Documentation of any other loans/debts you have, such as an auto loan or student loan.
  • Verification and documentation of other income such as alimony, child support, gifted funds, sale of a vehicle, etc.
  • Credit card statements to show balances and prove you’re making at least the minimum payments.
Borrower’s tip: Keep in mind that if you currently owe large amounts on your loans, it will likely limit what mortgage amount the lender will approve for you. Consider working to pay down or, better yet, pay off these loans before applying for a mortgage.
2.      Perform a “three Rs” credit health check:
  • Review your credit score and credit reports.
  • Raise your credit score if it’s lower than 680 (and preferably over 700).
  • Resolve recent credit issues and avoid opening new credit cards in the few months prior to applying for a loan. 
Borrower’s tip: Got a credit score just under the preferred 680? You might want to explore an FHA loan from First National Bank and Trust. You may be able to take advantage of lower down payment requirements than with conventional mortgage loans. It can be a good option for first-time homebuyers.
3.      Determine your down payment:
  • Typically, lenders will require at least a 10% down payment. Keep in mind, the lower your down payment, the more you’ll need to borrow and the higher your monthly mortgage payment will be.
  • If you’re able to put 20% down, you’ll save on your monthly mortgage because you won’t be required to have private mortgage insurance (PMI) — the insurance that protects a lender in case you foreclose because you can’t pay your mortgage.
Borrower’s tip: If you have a steady income and good credit, you may be able to qualify for First National Bank and Trust’s Downpayment Plus® program, which can contribute to your down payment and lower your borrowing costs.

4.      Give yourself a strict cap on how much house you can afford:
  • For starters, use our mortgage calculator to estimate your monthly payments.
  • Keep in mind that the price of a home you fall in love with is only one part of the payment equation. There will be taxes, interest, and possible insurance added to that base price, not to mention potential additional homeowners association (HOA) fees depending on your community.
  • Abide by the 35% rule, i.e., your total monthly mortgage payment (including fees, taxes, and insurance) will be no more than 35% of your gross income.
Borrower’s tip: Be tough on yourself and avoid the temptation to go “just a little higher.” Foreclosure is not something you ever want to experience!

6 Key Steps to Becoming a New Homeowner

  1. Prequalification — This is the step where the lender will review the documentation you’ve prepared to determine whether you’re a good risk and how much they’ll allow you to borrow. Be sure to tell sellers and listing agents you’ve been prequalified. This will make you a more attractive potential buyer.
  1. Credit Check — Once you’ve been preapproved, your lender will conduct a thorough check of your credit report, income, assets and borrowing history to ensure you’re qualified to be approved for a home loan. 
  1. Approval Letter — Think of this as your ticket to shop. Your approval letter opens many doors and puts you in excellent standing with sellers and real estate agents.
  1. Offer — Now that you know what you can afford and that your lender has your back, get out there, find your dream home and make an offer. A real estate agent will be your best resource for identifying homes in your price range that meet your needs and wants. Then make an offer. If the seller accepts, you’re on to Step 5!
  1. Underwriting Approval — Once you submit an offer, there will be another hard look at your assets and finances, this time by an underwriter. At this time, the home you want to buy will be appraised and should be professionally inspected to make sure all systems are in working order. The home’s title will also be verified for accuracy (boundaries, measurements, etc.). Then you’ll receive a closing disclosure from the bank with final details about your monthly payment, down payment, interest rate and closing costs. There shouldn’t be any surprises since you’ve seen most of this information in the loan estimate you originally received from your lender.
  1. Closing — Expect to sign lots of paperwork and to leave this exciting meeting with the keys to your new home! Be sure to bring your closing disclosure and your valid photo ID with you. Your down payment and closing costs are typically wired in advance of closing, so proof of that transaction may be needed as well.

Let Us Help Make Your Home Dreams Come True

The team at First National Bank and Trust knows their way around affordable mortgage options. We can work with you to help you understand how much home you can afford and preapprove you for a home loan to make shopping for a new home easier.
Have questions? We’re available to chat by phone at 1-800-667-4401, or you can contact us online via our message form options.

Once you've found your dream home, check out our New Homeowner's Move-In Checklist.