BEST STEPS TO GET A MORTGAGE

Purchasing a home is a big investment, possibly the biggest most people will make. Buying a home? then prepare yourself and consider all the factors when purchasing a home. It is important to conduct research, ask questions, and study the process carefully, after all you could spend 25 to 40 percent of your gross income paying for your home. We've compiled resources to help you figure out the right financing for you, this short list to help you stay on the right track to the BEST MORTGAGE OFFERS for you.

1. Do your homework

Study and compare your choices in types of loans, where you get your loan from-banker vs. broker, seek consul on any legal or financial matters you don't understand. Other than banks and mortgage lenders, look into mortgage brokers, seller financing, a family loan or insurance company financing. Don't choose a lender just because they have the lowest rate, remember to consider the total cost of your loan including the APR., loan fees, discount and origination points. The cost of the mortgage shouldn't be your only qualifier, select the company that you have confidence is reputable and will deliver the loan with the terms and costs they promised. Ask family, friends and business professionals for referrals. We've provided a Checklist-Getting a Mortgage and a loan comparison chart to help you sift through the differences.

2. Credit check-up

Pull your credit reports before you apply for a mortgage, a preemptive examination of your credit report gives you time to correct errors, avoid any surprises, and otherwise clean up your credit act.

3. Get the right loan for you

A loan is a product and one size doesn't always fit all. Decide what loan is right for you; if you plan on moving within seven years consider an adjustable rate mortgage (ARM) with a low introductory rate or a zero-point loan. If you plan on staying in a home longer (or for life), opt for a fixed rate and consider higher up front costs to obtain a lower rate. Be sure to look at initial interest rates, future interest rates and payments (if different), and the possibility of prepayment penalties. Investigate all your options, do the math and compare your choices side-by-side:

  1. Loan Length - The term, of a mortgage is 30 years by industry standards, but 15- and 20-year-term loans are also available. With a shorter-term loan, you can further reduce your interest rate, i.e., a 15-year rate is typically one-quarter to one-half percent lower than one for 30 years. Unless you know you've got sufficient long term income to handle the higher monthly payments of a 15 or 20 year loan, stick with the conventional 30-year mortgage. You can always make extra payments as if it is 15-year loan and save a bundle. The smaller rate and shorter term mean you'll pay less over the term of the loan than if you borrowed the same amount over a longer term. Consider your monthly budget because the shorter the loan term, the higher the monthly payments.
  2. Fixed Rate or ARM? - Fixed-rate mortgages protect you from the risk of rising interest rates, but you'll end up with a higher rate should interest rates fall. ARMs are a good choice for someone who knows their income will rise or at least keep pace with the loan rates periodic adjustment cap. Also if you plan to move in a few years and aren't concerned about the possibility of a higher rate, an ARM could be a good choice.
  3. What can you afford? - Your real estate salesperson will tell you how much they think you can borrow, but your credit report is a better indication of your credit worthiness. Excessive credit is almost as bad as no credit or even bad credit. Even if you pay your bills on time, lenders tend to focus just as much on how much credit you have available to you as they do on timeliness. So being up to your ears in car loans and credit cards is a sure way to be turned down for a mortgage. Postpone any big ticket purchases until after you buy your house. 

4. Get pre-approved, not just pre-qualified

As a potential buyer competing for a property, you will have a better chance of getting your offer accepted by being as prepared as possible. Put yourself in the sellers' shoes, you (as the seller) receive multiple offers to purchase your property, the buyer (you...a complete stranger) is asking to take your property off the market for at least two to three weeks while they apply for a loan.

When meeting with lenders, always ask how they define each term and what additional steps will be required to obtain a loan.

5. Shop for home insurance early

Once you have an accepted offer, start shopping for insurance. Don't wait until the last minute to get insurance, you'll get better coverage and better rates if you have time to shop around.

6. Get a home inspection

Independent home inspectors examine for roof and basement leaks, the mechanical systems and how long the appliances should last. It's highly recommended that you get property, roof and termite inspections unless you're buying a new home with warranties. Inspectors can't report on things they can't see, but their trained eyes are better than yours. Inspection reports are great negotiating tools when asking the seller to make needed repairs and this way you'll know what you are buying.

7. Get everything in writing

Do not expect verbal agreements to be enforceable, a written contract will override the verbal contract. More importantly, your state may require that contracts for the sale of real property be in writing.

8. Don't sign anything without reading it

Review in advance, whenever possible, any documents you'll be signing. Many of the documents you'll sign are standard forms and are usually available for review (even though specifics of your loan may be unknown early in the transaction). You'll have insufficient time to read all the documents during the closing appointment.

9. Know your rights

Every consumer has the right to equal access under the law, to credit and the right to full disclosure of all costs associated with obtaining a mortgage. It's up to you to review and know your rights.

10. Allow time for delays

Everyone wants real estate transactions to close on time, but usually transactions are delayed - sometimes a week or more. So you ask your landlord to terminate your lease the day your purchase transaction is scheduled to close, then two days before your scheduled closing date the transaction is delayed a week. What now?, will you be thrown out, will you have to find interim housing for a week or more? This type of stress can be avoided by terminating your lease one week after your scheduled closing, if there are any delays, your housing requirements are covered.

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