By  Tue Feb 5, 2013

Getting a Mortgage in 2013: Some Prep Work Required

Alex Proimos / Flickr | http://www.flickr.com/photos/proimos/7664260110/

Alex Proimos / Flickr source

As the housing market continues to spit out more positive statistics, many consumers are encouraged to make the leap to becoming homeowners in 2013 — but they will also need to ensure they are fully prepared to go through the mortgage application process.

It will be necessary to pay attention to detail and provide your lender with all of the documentation and information necessary to increase your chances for approval. Preparing for a mortgage requires advanced preparation so here are some tips to keep in mind when you make the decision to pursue a mortgage.

Prep your credit, plump your savings

You are only ready to consider a mortgage if your credit is in shape. If you are carrying around bad credit, you not only risk paying higher mortgage rates you also risk not even qualifying for a mortgage.

Being financially secure and having a plan to repay your mortgage is the only way a lender is going to feel confident enough to lend you thousands of dollars.

In addition to a good credit history, you also need to have a sufficient amount of money to be used as a down payment on a home. Most lenders prefer a fund to cover 20% of the home’s total cost as a down payment. There are loan programs such as FHA loans that will allow a lower percentage for down payments but ideally you want to have a sufficient amount of funds to cover the down payment on the house plus all of the associated closing costs involved with a mortgage.

Scope out your ideal lender

There are a few options to consider when you are looking for a home loan. Banks are the traditional route that many consumers first consider because they have already established a relationship with their respective institution — sometimes there are perks for having a mortgage with your bank. Chase, for instance, will offer 1% cash back on automated mortgage payments that are deducted from the borrower’s Chase checking account.

Specialized home loan companies are also a popular choice for consumers to consider when they are looking outside their own bank.

Other resources for mortgages can be dangerous as some homeowners have discovered lately. There are still agencies that offer mortgage loans specifically marketed toward consumers with poor credit profiles. While not all of these agencies are predatory lenders, it is vital that perspective borrowers conduct their due diligence to ensure the business they deal with on a mortgage is on the up and up.

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  • http://twitter.com/Avelloe Avelloe Mortgage

    In my experience banks rarely have the best programs or closing cost scenarios. A borrower’s best bet is to contact a local fully independent mortgage broker and see all of the programs that are available to them.

  • Jeo Ten

    This is laughable … a quick story: I was a Bank of America customer for years (not necessarily by choice, but because they kept acquiring the bank I was at … 3 times across 3 states). Last Jan, as a Premier customer, with a mortgage with BofA, I chose them to refinance. I had fantastic credit, the property appraisal came higher than expected, BofA held the existing mortgage, no cash out, and I was refinancing the new one.

    It took 6 and 1/2 months! It was ridiculous. To be honest, a refinance like mine should take 30 days max … even less really. Earth to Banks and US Government: Here’s how it should work … home owner calls bank, they do a credit check, employment and income verification, an appraisal is done within 5 days, and then they have me sign a single one page document via DocSign confirming the interest rate or term change, and flip a software switch to recalculate my payments going forward. Simple !!!! Hello … simple! This refi required 10 trips to my local branch to Fax a gazillion documents because BofA (and most banks) are not living in the 21st century. They don’t have an efficient method to delivery documents … ever heard of DropBox?. Ding!!!!

    It’s 2013 … the 21st century last I checked … our government and financial institutions are burying this country in debt and inefficiencies that are beyond comprehension. It’s shameful. I’m venting … so thanks for listening.

  • http://twitter.com/TKBlogs Tahnya Kristina

    This is great advice. I work as a financial planner in a bank branch and I am always surprised when people show up at a bank and expect to be approved for a mortgage when they have no idea how they stand financially. When people come into the bank for a mortgage pre approval I always advise them to gather all of their bank statements and order a copy of their credit bureau to make sure that there is nothing fishy being reported. Great post, I am going to share it on Dinks Finance next week.

  • Terry

    Absolutely agreed, and increased scrutiny of borrowers should be
    expected. Of course people bemoan this, but it’s just the way it is
    today. Also, the consumer can expect dysfunction when dealing with the
    big three credit reporting agencies. Regardless of what any of them
    claim, they often do not act and operate in the primary best interest of
    the individual consumer . Expect this also. This has only improved
    slightly since now by Federal mandate, consumers now have a right to
    their credit information. Lots of individual consumers don’t realize
    this wasn’t always the case. Absolutely spend the time in planning
    necessary and pursuant to obtaining a mortgage. Pay the small monthly
    fee that Experian, Trans Union and Equifax charge for unlimited
    electronic access to this information. Address any inaccuracies. People
    may be astonished what lurks in their files. Bottom line, get all
    inaccuracies corrected, and address any issues that may be a bad mark.
    It may definitley take some effort and patience when dealing with the
    credit bureaus, but be thorough and persistant. Know problems ahead of
    time and FIX THEM! There is so much consumer personal financial
    information available to us now that was not available even ten years
    ago. All consumers should be diligent, and vigilant when necessary in
    maintaining their information as independently as possible. Sure, it
    takes time and effort to do the research, but it is worth it. And when
    it comes to the banks, credit reporting agencies, and mortgage and title
    companies, follow the money, question everything, and trust no one. Look at all your options for mortgage including owner finance, perhaps with trusted legal council (oxymoron?). And, if stuck between and bank and a credit union. GO WITH THE CREDIT UNION!