Mortgages For Beginners

At one time, mortgages were a simple task that only meant comparing the fixed interest rate mortgages of a dozen or so lenders, but the mortgage search of today is more like finding your way through a maze. There are a dozens of loan types, hundreds of loan companies, credit unions, even stock brokerage firms originating loans.

Because there is so much to learn, finding a mortgage that fits doesn't begin with an application, but an education. If there is only one piece of the puzzle that is associated with home buying that you take the time to learn in detail, make it your mortgage. If you discover too late that you can't afford your mortgage, you could not only lose your home, but you will also be unable to purchase another one for years!

Getting information is easy. Mortgage information sources are as numerous as mortgage types.

Examine Your Finances

First, compare fixed-rate mortgages with adjustable rate mortgages to determine which type fits your current financial lifestyle and to some extent, your future obligations 15 to 30 years down the road. Learn how much of a mortgage you can afford. Lenders are apt to qualify you for as much as they are willing to lend which can be more than you can really afford. It's up to you to take stock of your income and expenses, both current and projected to determine what you can comfortably manage each month.

Along with your mortgage payment of interest and principle, remember to add related insurance costs, taxes, homeowner association dues and any other costs. Also, obtain copies of your credit reports from all credit reporting agencies. Obtaining your credit report in advance gives you time to challenge missing information, errors, or other discrepancies. If necessary you can put a statement on your credit report to explain any blemishes you can't cure. Lenders likely will ask you to explain problem areas on your credit record anyway. Your attention will let the lender know you are conscientious about your finances.

Shopping For Lenders and Loans

When you are ready to shop for a loan you have two basic choices -- direct lenders and mortgage brokers. Direct lenders have money to lend. They make the final decision on your application. Lenders have a limited number of in-house loans available. Brokers are intermediaries who, like you, have many lenders from which to choose. If you have special financing needs and can't find a loan to suit them, an experienced broker may be able to ferret out the financing you need.

Along with shopping the source, you'll also have to shop loan costs, including the interest rate, broker fees, points (each point is one percent of the amount you borrow), prepayment penalties, the loan term, application fees, credit report fee, appraisal costs and a host of others.

Your Application

Before you actually apply for a mortgage on or off line, gather documents necessary to prove claims you'll make on the application. The application will ask for information about your job tenure, employment stability, income, your assets (property, cars, bank accounts and investments) and your liabilities (auto loans, installment loans, mortgages, credit card debt, household expenses and others).

The lender will run a credit check on you, but you'll have to supply supplemental documentation including paycheck stubs, bank account statements, tax returns, investment earnings reports, rental agreements, divorce decrees, proof of insurance, and other documentation. If the lender deems you creditworthy, it will likely hire a professional appraiser to make sure the value of the home you are about to buy is commensurate with your loan amount.

Lock It Down

During your loan application, get a rate lock -- an essential document in a rising mortgage rate market. On or off-line, a rate lock -- in writing -- guarantees you a certain interest rate and terms for a given period.

• Lock in all the costs you can, the interest rate, and points.
• Set the lock "on application" rather than "on approval". On approval means you won't have a stab at rates until the loan application is approved. In a rising market, a lock on approval would cost you more in higher interest rate.
• Along with shopping around for the best mortgage, shop around for both the terms of the lock contract and its cost. Both can vary.
• Your lock-in period should be long enough to allow for purchase contract and other factors that could delay the process. Consider all factors that could delay your settlement, including the time it will take you to provide requested materials about your financial condition, unanticipated construction delays on a new house and the like.
• Most lock periods range from 15 to 60 days. Anything longer could be cost prohibitive. Ask your lender to estimate (in writing, if possible) the average time for processing loans. Once you lock-in a rate, you must make sure that your loan is approved and closed before the commitment expires. Follow up on your loan application to make sure you don't delay sending additional documents the lender requires.

Get Pre-approved

• Unless the lender has checked your credit, they cannot give you an accurate rate quote. We pull your credit, not a computer, so we give accurate information.
• We demand a high level of professionalism and service from all of our lenders, and we take pride in the level of service that they can offer you.
• We will call you within 24-48 hours of your inquiry so that we can interview you and qualify you for the best product that meets your current and future financial needs based on your income, equity and credit. Our goal is to improve your overall monthly financial situation (so that you may use us as a permanent resource for your financial needs).

Jumbo Loan Applicant

We understand the special needs of Jumbo Loan applicants. We have lenders that specialize in lending to borrowers with jumbo loans. Jumbo loans are loans over $322,700 which fall outside of Fannie Mae and Freddie Mac guidelines. Our jumbo loan lenders specialize in the lower documentation level programs, million dollar loans and a quick turn around from the appraisal of your home. You will have the added assurance that you will be dealing with a lending professional that deals with your type of loan every single day and will work to accomplish your immediate and long term financial goals.

Your Credit Report

Be on the offensive if you're buying or selling.

Your credit is the key to unlocking many doors on your way to a new residence. Understanding your credit -- and how it affects your move -- is important. Once you learn about your credit and its influence on important aspects of your life, you'll be better prepared to use it to your advantage.

CALL US FOR TIPS ON CLEANING UP YOUR CREDIT! WE CAN HELP!

Credit plays a major factor in your home purchase. When purchasing a home, your credit is a major factor in your mortgage loan. First you should consider getting pre-approved for a loan. This formal process includes having your credit checked and verification of your down payment funds and employment. Next, you can get an approval for a specific amount of money at a certain interest rate. Once you are pre-approved for a loan, your bargaining power with sellers is increased -- meaning you have a better chance of getting the home you want.

Ensure that the hunt for your new residence is a successful one. With a little time and preparation, you can use your credit knowledge as a powerful negotiation tool. You'll get the home of your dreams!

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"Financing Your American Dream"
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