May 19th, 2017 7:15 AM by Jackie Graves, President
If you want to buy a house but don't have oodles of cash lying
around, you'll need to learn how to get a mortgage—that
all-important home loan used to purchase property that you will then pay back
for years or even decades to come.
vast majority of home buyers need a mortgage to achieve their dream
of homeownership, but that doesn't mean lenders just hand them out to
everyone who asks. There's a process, with requirements you'll have
to meet. So before you even set foot in a home, make sure you know the steps on
how to get a mortgage so you can secure financing without a hitch.
start shopping for homes, you should shop for a mortgage.
Many first-time buyers wait until they've found the perfect home to start
shopping for a mortgage, and that's a mistake. The reason: All lenders are
a little bit different, so it pays to compare what they're offering in
terms of interest rates, closing costs, and
more, says Richard Redmond, a mortgage broker and
author of “Mortgages: The Insider's Guide.”
This step will also help you pinpoint any concerns
lenders might have with your application, and give you time to fix these
flaws so you're in great shape to make an offer once your dream home does
goal of meeting with a mortgage lender is to get pre-approved for
a mortgage. During this process, the lender will probe your financial past
and check out your income, debts, and other factors that help it determine
whether or not to give you a home loan—and how much money you can borrow.
Getting pre-approval is critical if you want your
home-buying efforts to succeed. Why? Because a pre-approval letter from a
lender shows home sellers that you've got the financial backup necessary
to buy their home. Without it, sellers have no guarantee you can afford their
place and, in many cases, won't take you seriously.
confuse pre-approval with pre-qualification, which is basically a
conversation with a lender about your finances where you don't need to provide
can be drafted on a piece of loose-leaf paper,” says Ray Rodriguez,
regional mortgage sales manager at TD Bank. “It often holds no value.”
apply for pre-approval, you’ll need to provide a lender with the following:
you’ve made an offer on a home and signed a sales contract, most lenders will
want to check out what you're buying with their money—and size it up
for themselves with a home appraisal. This means a home
appraiser will assess the market value of the house using comparable homes,
or comps, much like you and your real estate
agent did when coming up with how much to offer on the home.
times, the appraiser's price will end up approximately the same as
your own—in which case all is good, says Rick
Phillips, an appraiser and real estate agent in Vienna, VA. And
if the appraisal comes in higher than what you’re paying, you’re getting a
good deal. For example, if you’re paying $700,000 for a home and the appraiser
says it’s worth $710,000, you’ve instantly gained $10,000 in home equity.
if the appraisal comes in lower than what you’ve agreed to pay for the
home, that can be trouble, because lenders will loan you only as much
money as the assessment says it's worth. That means you'll have to pay the
difference—or persuade the seller to lower the sales price to what
the lender thinks is fair. Another option is to challenge the appraisal by
either filing an appeal or ordering a second appraisal. In most cases this all
works out—and if it doesn't, keep in mind your lender is essentially keeping
you from overpaying for a dud.
you buy a home, you “take title” of the
property—meaning you become the rightful owner. And your lender wants
proof! As such, it'll ask for a title search, which involves paying a
title company to search public records for any heirs insisting the
property is theirs, liens (from contractors who worked on the home but were
never paid), or other problems. Hopefully all goes well, but in case not,
this extra step could save you from a seriously scary situation where you're
fighting for ownership, or responsible for paying back old liens yourself.
the title is cleared, you can close the deal. That's where buyer, seller,
a lender representative, and any others involved in this process meet
to sign all the paperwork, transfer all money owed, pass along
the keys, and move on with their lives!
Sure, the whole process of
getting a mortgage may sound time-consuming and complicated, but rest
assured its purpose is to protect all parties, including you, from making