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How to Get a Mortgage

  •  Follow these simple steps to optain a Real Estate Mortgage

    Step 1: What Kind of Mortgage to Get   

    • First, you'll need to choose the type of mortgage that best suits your situation. The most common mortgage types you'll find are fixed rate, adjustable rate (ARM), loans from the Federal Housing Administration (FHA), or loans from the Department of Veterans Affairs (VA).

    Fixed Rate Mortgages

    1. Fixed rate mortgages have payments locked in at a set rate throughout the life of the loan.
    2. This can mean higher payments in the long run, but you always know what your monthly payment will be.You can also select the loan term (otherwise known as the length of the mortgage).
    3. Shorter terms mean lower interest rates and higher monthly payments.
    4. A longer term will let you have lower monthly payments, but they'll be at a higher interest rate.

    Adjustable Rate Mortgages

    1. Adjustable rate mortgages have payments that vary with interest rates.
    2. If interest rates decrease during the life of your mortgage, you'll end up paying less than the average fixed rate homeowner.
    3. If rates skyrocket, you could potentially be stuck with payments that you can't afford.
    4. It's a good idea to have a financial cushion if you're going to choose an ARM.

    FHA Loans

    1. FHA loans are government subsidized.
    2. They're good for buyers who:
      • Are purchasing their first home
      • Don't have terrific credit
      • Don't have the funds for a down payment
    3. There are limits in the amount that you can borrow, however.
    4. Be aware that interest rates are a little higher than a conventional fixed rate mortgage.

    VA Loans

    1. VA loans are available only to military veterans.
    2. These loans do not require a down payment.

    Other Options

    • There are some other fancy options out there, such as interest only loans (for a short time you pay only the interest on what you've borrowed). If you're not a financial whiz it is probably better to stick with one of the more standard options. 

    Step 2: Where to Get Your Mortgage 

    Banks

    1. Banks are a common mortgage lender.
    2. If you use the same bank for all your financial needs you could have the advantage of keeping all of your financial eggs in one basket.
    3. Local banks often have the best insight into what's required in your area.
    4. The reverse is also true: if you plan to buy outside your bank's service area, they probably won't know the requirements in your new town, and that can get you into trouble.

    Mortgage Brokers

    1. Mortgage brokers carry a range of mortgage options from different lenders.
    2. With the number of lenders they have access to, they can sometimes offer lower rates.
    3. They may also be able to find a mortgage for someone who hasn't been able to get financed elsewhere.
    4. Using a broker means you'll have to pay some additional broker fees.

    Savings and Loan Associations

    1. Savings and loan associations offer primarily long-term home loans.
    2. The application process can be a little easier than at commercial banks.

    Credit Unions

    1. Credit unions often offer low mortgage rates.
    2. You must be a credit union member to apply for a loan, which means meeting the union's requirements to join. 

      Closing Costs

  1. When you're calculating the amount of money you'll need up-front, don't forget to include the closing costs.
  2. These usually come out to somewhere around 2-7% of the total cost.
  3. Some sellers will agree to help cover the closing costs if your up-front cash is limited.
  4. Ask your realtor to work this request into your offer.
  • Once you've answered all of these questions, shop around and compare your options side-by-side to come up with the best choice for you. 

  • Step 3: Apply for the Mortgage

      1. This is a paperwork-intensive process that will take some time and organization to complete.
      2. Your lender will want to see a lot of documents that show how much cash you have at hand, how much you make, and what your debt situation is so they can determine if you're trustworthy enough to receive the loan.
      3. While each loan is different, you'll probably be required to produce:
        1. Recent pay stubs.
        2. W-2s and tax returns.
        3. Contact information for your employer(s).
        4. Information about things that you own: bank accounts, stocks, personal property.
        5. Information about your debts and credit.