April 11th, 2014 10:13 AM by Jackie A. Graves, President
for a mortgage is the first step toward owning a home and perhaps the most
daunting, especially if you are not prepared.
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.
are dozens of loan types and hundreds of loan programs available through
thousands of mortgage brokers, bankers, lenders, finance companies, credit
unions and even stock brokerage firms.
to popular belief, finding a mortgage doesn't begin with an application.
is a better first choice. Mortgage information sources are as 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 the way.
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.
you discover too 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.
1: Examine your finances
by determining 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 or need.
up to you to take stock of your income and expenses, 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.
2: Shopping for a loan
you are ready to shop for a loan you have two basic types of mortgage stores to
shop -- direct lenders and mortgage brokers.
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 lenders' 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
from the amount you borrow. The amount varies. Mortgage brokers are a lot
like real estate agents, make sure to go with someone who is recommended and
has been in the business a substantial amount of time. Internet brokers perhaps
receive the smallest cut, sometimes none at all, and can prove to be a real
just go with the lowest interest rate. There are many other factors that affect
the true cost of the loan, inlcuding 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 many others.
3: Apply for a loan
application process is the easy part -- provided you've gathered documents
necessary to prove claims you make on the application.
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).
lender will run your credit report to look at your FICO scores, which are very
important when it comes to rates and terms you will be offered. You will also
likely have to supply additional documentation, including paycheck stubs, bank
account statements, tax returns, investment earnings reports, rental
agreements, divorce decrees, proof of insurance, among other information. If
the lender deems you creditworthy, it will likely hire a professional appraiser
to make sure the value of the home you want to buy is worth your purchase