Today’s stricter lending environment means that processing a mortgage application is more complex than ever, given the number of steps that lenders, underwriters and mortgage insurers must all complete before home buyers truly have their financing in place.
To help ensure the process goes smoother, you can also take steps of your own. By planning ahead, you’ll be in a much better position to negotiate and move forward on a purchase and avoid any unpleasant surprises regarding your mortgage.
Five steps to obtaining a mortgage:
1. EVALUATE AFFORDABILITY
Lenders and mortgage insurers look at a variety of factors, but the two most important are your monthly payment and your total debt load, relative to your gross income. As a home buyer, it’s also important to consider additional expenses, beyond your mortgage payment, that can impact how much home you can afford. Depending on your situation, these other expenses could include property taxes, mortgage insurance, homeowners insurance, home maintenance expenses, homeowner association fees, parking expenses and utilities.
2. DISCUSS YOUR OPTIONS
Deciding what type of mortgage is best for you depends on your personal situation, your financial scenario and your future plans. For example, if your down payment isn’t large enough to qualify for a conventional loan, a CMCH mortgage can be an excellent option. Alternately, you may qualify for an attractive program offered at the national or local level. Mortgage programs are always changing so ask your ABR® about current options.
3. INTERVIEW LENDERS
Your ABR® can provide several recommendations, based on past home buyers’ experiences. Rates and fees are typically very competitive between lenders, so it’s often more important to focus on other factors, including the level of service provided and how well they’ve executed transactions for other buyers. The type of mortgage you are seeking may also impact your choice of lender, since some are more familiar with certain programs than others.
4. GET PREAPPROVED
Completing a loan application with one or more lenders will help confirm whether your intended mortgage financing plans will work out as hoped, or if you must modify your plans. It’s important to understand since preapprovals are contingent upon the lender receiving full documentation, your preapproval does not guarantee that you have a mortgage. Still, it’s an important first step that will also put you in a better negotiating position with sellers.
5. COMMIT TO A LENDER
As soon as you are under contract to purchase a home, commit to working with one lender to complete your mortgage application. You will probably be charged a fee at this point because this is when the lender starts incurring processing expenses on your behalf. Show your lender that you are serious about working in partnership with them by submitting all the required documentation as quickly as possible.
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