How to get a Mortgage

Mortgages are acquired through your local banks, credit unions, mortgage companies, saving and loan associates and home financing. Here is a step-by-step look at the process.

Rev Dan Catt

Here are some steps through the mortgage process:

• Application

Find a suitable bank or financial institution that provides mortgage services. Prepare to present proof of income, certificate of employment and ownership of assets and overall debts. A meeting is then scheduled.

• Verification

A background check for the authenticity of declarations made by the borrower (you) is made by the lender (bank, financial institution), and an overall assessment is made of the buyers capability to pay the mortgage.

• Approval or denial

Decision would be made by assessing the borrower’s financial history, current assets and debts, and market value of the house to be mortgaged.

Here are steps you can take to help your chances:

1. Make sure you have a good credit standing

Interests rates made on mortgages are based on your credit standing. If you possess a good credit report you will present a low risk client for the bank, hence you’re given lower rates. Make sure that credit reports made are authentic and reflect your true credit standing regarding debts or liabilities. An error made with this document may cause your bank to deny you the loan. If you are not in a great or good credit position, it is wise to continue or pursue the loan when your credit standing has greatly improved. In addition, applicants who possess good credit reports are in a stronger position to negotiate terms and rates.

2. Check your finances and make an assessment of what type of house that well within your price range

Planning to buy a house does not stop with having your loan approved. A careful assessment of your income and expenses are vital too. A long term outlook and job security and the amount of savings you have to prevent a possible lost of job or income is considered in order to ensure that payments will be made.

3. Consider  all the charges which will add up to monthly payments that comes with your loan

Make sure you are aware of all factors that add up to the total amount of monthly payments to be made. Additional payments such as taxes, insurance and the loan payment itself should be totaled to give a general picture.

In choosing a home, it is important to consider these additional charges as they can greatly reduce your capability in making monthly payments. More often than not, these simple additions are taken for granted as a house is assessed for its value and when their monthly payments come, they are suddenly overwhelmed by the true cost of purchasing the house.

4. Another key factor for lender approval is your capacity to make payments

If your bank determines that you have a high risk in not making the payments it translates to higher interests rates. It is mainly based on your monthly income and if it good enough to pay for your loan against your monthly expenses. Another important thing to consider is your credit histories; have you incurred default payments or were you able to make the payments. It is important to settle these credit histories for the bank to know that you are willing and able to make payments.

5. What is the maximum available cash you can provide as downpayment

A 5% downpayment of the market value of the house and mortgage insurance is usually required by lenders. Government programs allow borrowers to put a lesser amount of downpayment if they qualify.  Remember that the greater the amount of downpayment made the lower the interest rate that is made. This is because a far lesser amount is to be financed by the bank and a lesser amount can be charged for interest. It is important you give the most flexible and affordable downpayment you can give.

Another great way of lowering the monthly costs for your loans is avoiding mortgage insurance. A downpayment of 20% for the house is required in order for you not to avail mortgage insurance. One way of providing for this 20% is to put your old home as payment and additional downpayment.

What is the ideal figure to make or close your mortgage?

20% downpayment for the house value to avoid mortgage insurance and for closing costs around 3-7% home purchase price.

6. Strengthen your negotiating position with the home seller by pre-qualifying for a loan

Pre-qualifying for a loan does not oblige you to continue with the mortgage. Strengthen your position by showing the seller that you are in a position to make the deal and are merely negotiating the final price for the house. A lower selling price means that you have a lower downpayment and interest rates will be also lower since you will need a lesser amount of financing. When you do get to lower the market price you can then proceed and check out other financial institutions that offer greater flexibility and more competitive rates.

7. Brush up on those technical terms

A brief overview on some technical process and understanding on how the mortgage system works gives you a better understanding and better decisions when the time comes. This will leave you in a better position when dealing with financial institutions or banks as you understand what they’re offering and the best deal offered.

8. Choose the best option for going about your mortgage and that which meets your financial objective

There are a number of types of loans available, fixed rate loans, special financing loans, adjustable loans are just a few to mention. Having knowledge on the different loan types provides you with better decision making.

9. Always be updated with the latest numbers

Information on mortgage rates and bank deals are readily available. The internet is a great source of information and is generally free. A quick look at credible business sites tell you where the rates are and where they’re going.

10. Check out your local financial institution and submit your application

After going through the different steps you are now in a position to make the best decisions and find the best deal that works for you.