Getting a Mortgage: The Most Important Step in Buying a Home

Filed by admin under Mortgages — 11:57 pm
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You're ready to take the plunge. Just two blocks away, a wonderful Cape Cod has gone up for sale, and your apartment is getting rather cramped. So what's holding you back? If the idea of getting mortgage makes you want to run into your apartment manager's office and extend your lease another ten years, you have good reason. Getting a mortgage is sometimes a tedious and long process. However, with a little preparation—and a little research—you can make obtain a mortgage with relatively few bumps and bruises.

Get Your Credit in Order

Start by obtaining a credit report. Any one of your credit card companies will supply one for a small fee, or you can obtain one at myFICO or for free at Annual Credit Report (for U.S. residents only). Are there any outstanding bills that need to be paid? Pay them now to avoid slowing down your approval process. Remember, getting a mortgage is a lot like letting a stranger rifle through your financial underwear drawer. No matter how hard you try to hide missed or late payments, they will be found. Better to address them now than later. Otherwise, your mortgage interest rates may be higher. Worse yet, you could be turned down for a mortgage entirely.

Decide What You Can Afford

This is really easy to do, so take the time to decide what you can afford before you decide that the Cape Cod is the only home for you. If you've been looking online for homes, many real estate websites offer "mortgage calculators" to help you determine how a home will fit into your monthly budget based on down payment, current interest rates, and length of the loan. Also, you can visit lender websites or just call your local bank or real estate agent.

Find a Mortgage Lender

This can be tricky, but don't be overwhelmed. Make sure that you obtain quotes from at least 3-5 lenders. Doing so will ensure that you get competitive interest rates and reasonable closing costs. Also, have lender itemize each fee so that you can compare apples to apples when you research other lenders. For example, if one lender charges a $350 origination fee and $200 for the appraisal, you can accurately compare it to another lender with an itemized list.

Get Pre-Approved

Don't be lulled into sense of security of a lender says that you are "pre-qualified" for a mortgage. The only way to ensure that the percentage rates and closing costs quoted for your mortgage are accurate—and that you are indeed qualified—you must be pre-approved.

Go Shopping

Now that you have the peace of mind that comes with getting pre-approved for a loan amount in your price range, it's time to have fun. Go shopping! If that Cape Cod still calls to you, then kiss your apartment manager good bye and pack up. You have your mortgage, now get your house!

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