How to Apply for a Mortgage
in 6 Simple Steps
At first, you were just "taking a little
drive to see what's out there." Then you started showing
up at open houses. Now you have a real estate agent representing
you as a potential home buyer. So things are getting serious
as you move closer to finding that perfect house for you.
What's next on the agenda? Getting pre-approved
for a mortgage loan. Sounds intimidating, but once you get
over the hurdle you'll be financially prepared to make an
offer on your dream home when it comes along.
Note: It's important to find out how much
you'll be approved for BEFORE you start making offers. This
way, the seller of the home will know that you're serious
about making this purchase.
6 Steps to Getting a Mortgage Approval
1. Find out your credit score.
There are three major U.S. credit bureaus
who have this information on file: Experian, Equifax, and
Trans Union. Each uses their own score model, so you'll find
that your credit score varies slightly from one to the next.
In order to obtain your score, you must provide your social
security number and other personal information. Thus, it pays
to be sure that that the company you're divulging this information
to is legitimate and trustworthy. As of 2007, a reliable website
where you can obtain your credit score for free is https://www.annualcreditreport.com.
2. Decide on a lender.
Unfortunately, "sub-prime lending practices"
are having an impact on the housing market at this time. Banks
are now being extra careful to weed out candidates who fall
into the red zone and could potentially default on their mortgages.
Even so, every person and situation is unique, so it pays
to shop around and find out what you qualify for. There are
still many solutions to obtaining a mortgage that best suits
your needs.
One option is to visit http://lendingtree.com
and get on their mailing list, upon which you will be contacted
via email and phone by competing smaller banks. If you don't
feel comfortable doing this, you can always call your financial
institution or one that has been referred to you by a friend
or family member. Another option is to select a well-respected
bank in the area - all of the major banks have mortgage departments.
Finally, you might try Wells Fargo or Countrywide Financial
- two of the biggest mortgage lenders in the country.
3. Speak to a home mortgage consultant.
You can do this either by phone, or by meeting
with a mortgage specialist in person at your bank. If you
do it by phone, simply get connected with the mortgage department
and explain that you'd like to inquire about a possible mortgage
loan. During the initial conversation, the home mortgage consultant
will ask you questions about your current income, savings
and assets, credit history, the locale where you're looking
to buy property, and the approximate price of the home you're
interested in.
At this time he will try to "get a
read" on what type of borrower you will be, based on
the information you provide and your "nonverbal cues."
(For example, if you waiver and falter when responding to
inquiries about your credit, the mortgage consultant might
assume that you have a spotty record.) After he makes a general
determination of your credit potential, he will approximate
an interest rate that you could feasibly qualify for and then
calculate an estimated monthly payment. He will also go over
items like closing costs, property taxes and insurance. From
here, your loan application will be processed by the financial
institution.
4. Review your mortgage application.
Approximately 1 to 2 weeks after speaking
with your home mortgage consultant, you will receive a packet
in the mail that includes a letter, credit score results and
an explanation of the factors that contributed to your score,
as well as a Good Faith Estimate of settlement costs and Truth
In Lending disclosure. The good faith estimate is just that
- an estimate. Since you don't know exactly how much the home
that you'll be buying will cost yet, you can't expect that
these numbers will be accurate. The purpose is to give you
an idea of the monthly expenses you'll be incurring.
If you "pass" the initial credit
review, you will be asked to provide proof of employment including
pay stubs, W2s and bank statements. Self-employed persons
must provide a current balance sheet, profit and loss statement,
and copies of federal income tax returns. There is also something
called a "no docs" loan where you don't have to
provide proof of income, but if you opt to go that route you'll
be paying a higher interest rate. Speak to your mortgage consultant
about this.
5. Review your credit approval letter and
related materials.
Study your loan application and related
paperwork carefully. If there is anything you need explained
further, give your mortgage specialist a call (the number
will be listed right on the letter and pre-approval notice).
There are several spaces for your signature on these forms,
but you don't need to rush this part of the process until
you find a house that you're ready to make an offer on. When
that day arrives, you will discuss the price of your home
with the mortgage specialist, fill out the forms with your
contact information and all other pertinent details, sign
and fax to your mortgage company.
6. Determine if you can feasibly afford this
amount per month.
Now is a good time to do a bit more research
on things like closing costs, escrow accounts, fixed versus
ARM (adjustable rate mortgages) and other items that you may
not be familiar with. Do your house hunting homework; find
out what the tax rate is in the area where you're looking.
Estimate your monthly expenses for things like heating bills,
electric, cable, garbage pickup and so forth. Remember also
that you will be filling your new home with furniture and
supplies - cleaning items, landscaping equipment, appliances
and everything you need to live.
If, after all this, you feel sure about
your future as a home owner and mortgage lendee, then give
yourself a pat on the back for getting this far. Now go out
and find that perfect house that feels like home to you!
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Ready to take the guided tour of Warren County,
NJ?
Email
Rich to schedule an appointment to discuss your home buying
needs and explore the area.
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