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How to Get a Mortgage
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How to Get a Mortgage

How to Get a Mortgage Unless you have saved a lot of money or have a rich uncle, you will probably need to borrow money to buy a home. Figuring out how to get this all-important loan can be like finding your way through a maze. But millions of Americans do it and so can you.

Choosing a Lender

Before you start to look for a house, you should first nail down exactly how much a bank or other lender will provide for your home purchase. It makes no sense to spend weeks shopping for a house in the $400,000 price-range and then discover that you only qualify for a $250,000 loan.

The first rule is to shop carefully for a lender. Take your time and do the research. You need to make sure that the institution is financially sound and reputable. Then decide which lender offers the best interest rates. Typically you should avoid ďsub-primeĒ lenders because they will usually charge higher interest rates. As long as the lenders on your list are all financially solid and reputable you can research to see which company offers the best interest rate. A difference of just one percent less will save you thousands of dollars.

Banks are the most traditional type of lender and therefore a good place to start. They usually provide the lowest interest rates. Many banks have a mortgage lending department with qualified people to handle the entire process of buying a house. They usually offer personal service from start to finish. Mortgage brokers are another possibility when it comes to finding a good lender. A mortgage broker should be reputable and have been in business for a long time. The advantage of a mortgage broker is that they usually offer a wider variety of loan options than a bank. And they should have a good knowledge-base of which local and national lending institutions are offering the best interest rates.

Credit Ratings, Pre-Qualification and Pre-Approval

Once youíve selected a lender, the process of evaluating your credit will begin. Itís a good idea to find out what your credit score is before you contact a lender. Your bank can check this for you or recommend a safe online service. If you have a good credit score, you will be able to qualify for a higher loan amount and perhaps a lower interest rate. Knowing your score will help you negotiate a final interest rate. Also, if your score is poor, you will have time to work on improving your credit condition by reducing debt.

Before you visit the lender, find out exactly what documentation the company requires to evaluate your financial condition. To establish a loan limit, the lender will look at your overall family income, your tax records, assets and liabilities, age and other factors.

If you wish, the lender can offer you an informal estimate of how much loan money you might be eligible to receive. This is called "pre-qualification". It will give you a general idea of how much you might be able to spend on a house. With this estimate in hand, you can do some preliminary house shopping.

But before you can actually buy a house, you will need to be "pre-approved" for a loan. In this case, the lender will do a formal evaluation of your credit and financial situation and then give official authorization for you to receive the established loan limit once you find a house. This pre-approval allows you to go out and negotiate for the house you want.

Real Estate Agents and Realtors

Once you have been pre-qualified or pre-approved for a loan, finding a good realtor is a good first step to start shopping for a house. Even though a lot of real estate is advertised online, it is still beneficial to work with a realtor. (Remember that realtors must have a state license, but that not all real estate agents are realtors.) A good realtor or agent will have a thorough knowledge of whatís on the market, where the best buys are located, and how to help you through the bureaucracy of buying a home. The realtor will receive a commission based on the amount of the sale. This price is almost always embedded in the cost of the house.

To find a good realtor, start with the recommendations of your friends, colleagues and family. If thatís not possible, you can get a recommendation from a reputable commercial realtor. Because these people only deal in commercial properties they are usually eager to recommend the best residential realtors they know. You can also contact the National Association of Realtors for help and advice.

Author: Glenn McMahan


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How to Get a Mortgage