A mortgage loan is the best way to the American Dream of owning your own home. Additionally, it can also be a great way for real estate investors to finance their properties. No matter which one of these categories you fall into, the steps below will help you learn how to obtain the mortgage information and financing you need. You'll find tips about home loans to help you through the process.
- Your mortgage loan journey needs to begin at least 3-6 months before you plan to talk to lenders. At this time, you need to pull all three of your credit reports and all three of your FICO scores. The scores you buy need to come directly from the FICO website. Purchasing these numbers from a credit reporting agency or other website will not do you much good, as they do not use the FICO formula to calculate the scores they sell. Likewise, the credit reports that you purchase should come directly from each of the three credit reporting agencies, as they will be most accurate. This is not the time to skimp out on the right way to do things in order to save some money.
- Once you have your reports and scores, you need to go through them several times to determine your credit standing. It is important to make sure that each item is reporting correctly. Just because you do/did owe a debt that is listed, does not mean that the entire entry is reporting as it should be. Keep in mind that credit reporting agencies have a very high discrepancy rate. If there are inaccuracies, you will need some time to get them corrected.
- Next, you will want to do a little research to see what kind of mortgage loan you could possibly qualify for. This includes conducting an Internet search to obtain unofficial quotes, without allowing the companies to pull your credit report. Typical questions you will be asked include what your income is, how much you owe toward debt each month, and what your average FICO score is. Give fair and truthful answers to receive the most accurate initial quote to work from. Although this will only be an estimate of what you may be able to expect, you can still use it to help you plan during steps #5 and #6.
- Once you know what kind of rate to expect, you can use this number to help determine what kind of monthly payment you can reasonably afford. This monthly payment amount can then help you determine what kind of home you should look for, depending on how many years you plan to carry the loan. This may also be a good time to make a list of currently available homes that you are interested in.
- Calculate how much you will need at closing and if this is a number that you can afford. These costs will include more than just your down payment, as there will also be many fees from the mortgage process that could add thousands of dollars onto your total. Additionally, if you have any outstanding debts on your credit report, you will likely be required to pay for those at closing. It is important to know that creditors and collection agencies monitor credit reports of debtors. Many times they will hold on to your debt until they see that you are looking for a mortgage (based on hard inquires from mortgage lenders appearing on your credit reports) and add the debt to your report before closing. Make sure you know what kind of potential debts could pop up and that you can afford to pay them at closing.
- Pre-qualify with the companies that you are most interested in borrowing from to see the rate each will be able to offer you. You can use these numbers to help determine which company you ultimately want to go through. Saving even 0.25% on your interest rate can save you thousands on a 30-year mortgage loan and may even save you $100+ on your monthly payment.
- Once you have decided on a lender, you can then fill out the official application. Since you have been in contact with the mortgage loan officer and they know the specifics of your credit and financial standing, you will likely be approved. However, your application still needs to be processed and underwritten before the offer is finalized.
- Closing is your last step before you receive funding for your home. At closing you will need to sign the final papers with the seller of the home, pay your down payment and closing cost fees, and have the title of the home legally transferred to you.
This mortgage information should help you understand home loans. Sometime between steps #6 and #8, you will need to make a final decision on the home that you want to buy. You also need to be in contact with your realtor at this time, so that you can have a deal finalized with the seller of the home by the time you have completed your mortgage loan search. This will allow you to move as quickly as possible from being approved for a loan to living in your new home. Good luck getting home mortgage loans!