Obtaining a mortgage is one of the most important steps in the home buying process. In fact, it is so essential that we energetically counsel all of our potential buyers to become pre-approved for a mortgage before they begin searching in earnest. With this knowledge in hand, a buyer can then move forward confidently, identifying and targeting a very specific price range in the market from which to select.
Pre-approval also plays another vital role. In the eyes of someone selling a property, potential buyers who are pre-approved are seen as more desirable. So, in a situation where there are multiple offers placed on a property, some with and some without pre-approval, that factor alone can have a dramatic impact on how those offers are considered.
For your information, we recommend that you read the brief outline provided at this site of the many types of mortgage products available to assist you in your quest of the right financing. It is strongly recommended, however, that a lender be contacted directly so that he/she may tailor a plan fitting your own personal financial goals.
Step One - Choosing a Lender
Certainly while going to your daily banker is a viable option, it is not always the best one. There is a distinct difference between a bank and a mortgage company. Mortgage companies often provide and offer more resources and can therefore provide you the customer a great variety of products and plans to choose from. They can tend to be more flexible in their credit requirements as well.
Step Two - Ask the Right Questions
Important questions you must ask! Lenders do vary not only in interest rates, but in their closing costs. You might be dazzled by the interest rate, but look to the fine print to see what upfront closings costs will be. They might be giving you a lower rate, but making a large profit from you in upfront fees. Always, always require a Good Faith Estimate to be sent to you.
A Good Faith Estimate is a comprehensive form where the lender discloses exactly all the costs involved which include estimated taxes, anticipated payment and cash needed to close on the house. It will also explain in detail the type of loan, interest rate and all costs associated with selecting a loan. Warning! Do not write any check to a Lender for any processing fees until you have been provided with a "Good Faith Estimate".
In your first phone conversation with a lender, you will provide him with some necessary bits of personal information, such as: income, current debts, credit card payments, and job history. The lender will take this undocumented information and form a general opinion as to your personal ability to purchase a home, and project what you can afford. This process is known as being "pre-qualified".
When you formally select a lender, they will formally document your personal information, which could take up to 2 weeks, at which time you will be considered "pre-approved" and ready to purchase a home.
Questions to ask:
What is the current interest rate?
What is your loan origination fee?
What are my closings costs for this loan?
What is your timeline for processing my loan?
Can you send me a Good Faith Estimate and explain it to me.