Competitive Rates
Shopping for a mortgage is the first step toward owning a
home and perhaps the most daunting, especially if you are
not prepared.
Historically, home owning has been a good investment. But
that doesn't mean that making a large down payment is the
best strategy.
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.
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 later.
By comparing different loan scenarios your more likely to
get more value for your money. Try our Loan Comparison
Calculator and sort through the different variables
associated with getting a new loan.
If 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 credit
and the possibility to purchase a home later.
Examine your Finances
When you buy a home, determine how much mortgage 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 some reserves.
Don't forget related insurance, taxes, homeowner association
dues and any other costs rolled into the mortgage payment.
Don't forget about furniture, it's not cheap. Odds are that
you will need some for your new home. Can your back handle a
sleeping bag for six months?
Shopping for a Loan
There are basically two basic types of mortgage stores to
shop -- direct 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 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 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 the
real bargain.
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.
Don't throw all your money into the down payment and then
find yourself stuck at closing.
Lenders break up the amount that they charge you into the
interest rate, fees and points. By looking at either only
the interest rate, you don't see the whole picture. Using
APR helps you compare apples to apples.
An APR combines the two, so that you won't be confused by
different fee and interest rate combinations.
Applying or Qualifying for a Loan
The application process is not that hard -- provided you've
gathered documents necessary to prove claims you make on the
application.
Qualifying online can help ensure that you get good rates
and options with a minimal amount of time and paperwork.
There's a huge online database allowing borrowers the
ability to shop literally thousands of lenders, rates, and
programs with a mouse click.
Gather 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).
You'll have to supply additional documentation including
paycheck stubs, bank account statements, tax returns,
investment earnings reports, rental agreements, divorce
decrees, proof of insurance, and other documentation. A
credit check will be required at some point to determine
your credit status. If you qualify, then an appraisal is
usually ordered to make sure the value of the home you are
about to buy is truly worth your loan amount.
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