Steps to home financing
Not so long ago, shopping for a mortgage simply required consulting a handful of savings and loan companies and comparing interest rates. Shopping for a mortgage today is an extremely complicated task that requires a lot of time and effort.
There are many types of loans and hundreds of loan programs offered by thousands of banks, mortgage brokers, lenders, credit unions and finance companies. But if you keep a few basic things in mind, obtaining a mortgage doesn't have to be a long and painful process.
Get your house in order
The first thing you should do is take a good, long look at your finances. Thoroughly examine your income and expenses and then determine how much of a mortgage you can afford. Get the house and mortgage that you need, not that you want. Many lenders will offer you more than you actually need, which might be tempting at first, but could be financially ruinous in the future.
Be somewhat cautious of pre-qualified and pre-approved mortgages, because mortgages that require less information usually have slightly higher interest rates. Also, be sure to keep in mind where you think your finances will stand 10 or 15 years in the future.
When shopping for a mortgage, there are two basic routes you can take: direct lenders and mortgage brokers. Direct lenders are those that actually have money to lend, such as banks and credit unions. Mortgage brokers are essentially a third party that sifts through the many options available and finds a mortgage that suits your particular situation.
Mortgage brokers are often a good solution if you have special financing needs that you have not been able to satisfy by looking on your own. However, brokers are paid from a portion of the loan you receive. But you should be able to find reasonable rates if you shop around. Internet-based mortgage brokers are often a reliable and cheap alternative.
As long as you have all the documents you need, applying for a mortgage is fairly easy. You will need to provide information about your income, employment, job tenure, assets (such as property and investments) and liabilities (expenses and debt). You will also receive a credit check, for which you need to provide documentation such as pay stubs, rental agreements, bank statements, and tax returns.