How to Shop for a Mortgage and get Pre-Qualified

Unless you are cash wealthy, chances are you will need a loan to buy your dream home. There are many lenders out there and in spite of recent events; many are keen to sell you a mortgage. Rates and terms differ, so it pays to do your homework!

Things you will need:

A legal notepad
A calculator
A computer connected to the Internet

Step 1

How’s your credit rating? You need to see your credit rating. Find a credit-reporting agency either Google for on line searches or use the Yellow pages. Once you make contact ask to see your credit report. This will cost you around $15.00. Once you have the information use it to resolve any outstanding credit disputes.

Step 2

While you are there get your FICO score (named after the software the mortgage industry uses to evaluate these things). The closer the score is to 800 the better for you. A high score will give you better negotiating leverage. A sighting of this magic number should cost less than $10.00

Step 3

Do your homework. Sit down a work out your true financial picture. You need to list income from all sources and outgoings, which include debts and credit card payments. This picture will tell you what you can afford. Armed with this you can choose your property and know what you can or cannot afford.

Step 4

Now choose the best type of mortgage for your situation. A fixed rate program will keep the same interest rate throughout the life of the loan. An adjustable rate will change. It will usually start out at a low interest rate and then fluctuate in line with prevailing economic circumstances. Whilst interest rates are low your ideal property might be easily affordable but when they rise the costs might become burdensome.

Step 5

Mortgage terms range from 15 to 30 years. The shorter the term the higher the monthly re-payments. Many people will go for longer term mortgages because the pay less each month, but you will find this could work out very much more expensive in the long term thanks to the power of compound interest. Do your sums before you commit yourself.

Step 6

Shop around for a mortgage provider. First start with your bank or savings and loan association. Often they have preferential rates for existing customers.

Step 7

If your bank is no help engage the services of a mortgage broker. It’s his job to find you the best deal out there. He is on commission so this is his livelihood. Conversely shop around on line. Many web-based lenders offer very attractive terms. See www.lendingtree.com

Step 8

Negotiate from a position of strength and do not be brow beaten into a deal that might be beneficial to the lender but not to you.