The first step in owning a home is to look for a mortgage. There are different types of loan products in the market. The task of choosing which loan type or which company can be difficult when you really want to choose the best as there are dozens of loan types and hundreds of loan programs available through thousands of mortgage brokers, bankers, lenders, finance companies, credit unions, even stock brokerage firms.
The source of mortgage information can be as enormous as the number of mortgages available. Media such as web sites, newspaper articles, mortgage books, consumer seminars and workshops, financial planners, mortgage brokers, lenders and real estate agents are all available to assist you along the way.
Step 1: Examine Your Finances
First and foremost, you must determine how your future mortgage payment will fit your current budget and, to some extent, your future obligations 15 to 30 years down the road. Determine how much mortgage can you afford? By then, you would know if you can afford the house you are thinking of buying. Together with the mortgage payments, you should also consider other expenses like related insurance, taxes, homeowner association dues and any other costs rolled into the mortgage payment.
Step 2: Shopping For a Loan
When you are ready to shop for a loan you have two basic types of mortgage providers to choose from direct lenders and mortgage brokers. Direct lenders have money to lend. They make the final decision on your application. Brokers are intermediaries who, like you, have many lenders from which to choose.
Along with looking for the source, you'll also have to know how much the loan would cost you, including the interest rate, broker fees, points, prepayment penalties, the loan term, application fees, credit report fee, appraisal and a host of others.
Step 3: Apply For a Loan
The application process can be the easiest part – you just have to prepare all pertinent documents in proving your credit worthiness and other information you declare in your application. The application will ask for information about your job tenure, employment stability, income, your assets and your liabilities. Make sure you have the necessary documentation to back you up.
The lender will run a credit check on you to take a look at your credit status, but you'll have to supply additional 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 sees you as creditworthy, it will likely hire a professional appraiser to make sure the value of the home you are about to buy is truly worth your loan amount.