Examine your finances and shop around before you apply.
Shopping for a mortgage is the first step toward owning a home and perhaps
the most daunting, especially if you are not prepared.
Once a simple task, that meant comparing fixed rates from among perhaps a
dozen or fewer savings and loan companies, the mortgage hunt today is like
finding your way through a maze.
There are dozens of loan types and hundreds of loan programs available through
thousands of mortgage brokers, bankers, lenders, finance companies, credit
unions, even stock brokerage firms.
Contrary to popular belief, finding a mortgage doesn’t begin with an
Education is a better first choice. Mortgage information sources are vast
as the number of mortgages available. Web sites, topical newspaper articles,
mortgage books, consumer seminars and workshops, financial planners, real estate
agents, mortgage brokers and lenders are all available to assist you along
First and foremost, you must determine how your mortgage payment will fit
your current budget and, to some extent, your future obligations 15 to 30 years
down the road.
If you discover to late that you can’t afford your mortgage, you’ll
not only face the possibility of losing the roof over your head, but you could
also damage your ability to purchase a home later.
Step 1: Examine your finances:
If you can afford to buy a home, you must then determine how much mortgage
you can afford. Lenders are apt to put your loan application in the best
light and qualify you for as much as they are willing to lend, which can
be more than you can afford.
It’s up to you to take stock of your income and expenses, both current
and projected to determine what you can comfortably manage each month. Along
with your mortgage payment, don’t forget related insurance, taxes, homeowner
association dues and any other costs rolled into the mortgage payment.
Step 2: Shopping for your loan:
When you are ready to shop for a loan you have two basic types of mortgage
stores to shop. District lenders and mortgage brokers.
Direct lenders have money to lend. They make the final decision on your application.
Brokers are intermediaries who, like you, have many lenders from which to choose.
Lenders have a limited number of in-house loans available. Brokers can shop
many lenders for each lender’s store of loans. If you have special financing
needs and can’t find a lender to suit them, an experienced broker may
be able to ferret out the loan you need. Mortgage brokers, however, are paid
with a slice of the amount you borrow, some more than others some less. Internet
brokers today perhaps receive the smallest cut, sometimes none at all, and
can prove to be a real bargain.
Along with shopping the source, you’ll also have to shop loan costs,
including the interest rate, broker fees, points (each point is one percent
of the amount you borrow), prepayment penalties, the loan term, application
fees, credit report fee, appraisal and a host of others.
Step 3: Apply For a Loan:
The application process is the easy part. Provided you’ve gathered documents
necessary to prove claims you make on the application.
The application will ask for information about your job tenure, employment
stability, income, your assets (property, cars, bank accounts and investments)
and your liabilities (auto loans, installment loans, mortgages, credit-card
debt, household expenses and others).
The lender will run a credit check on you to take a look at your credit status,
but you’ll have to supply additional documentation including paycheck
stubs, but you’ll have to supply additional documentation including paycheck
stubs, bank account statements, tax returns, investment earning reports, rental
agreements, divorce decrees, proof of insurance, and other documentation. If
the lender deems you creditworthy, it will likely hire a professional appraisal
to make sure the value of the home you are about to buy is truly worth your