- Selecting a mortgage lender.
- Pre-qualifying and getting pre-approved for a loan.
- Collecting information for the loan process.
- Cleaning up credit report problems.
You found your dream home and you canâ€™t wait to move, but then the butterflies start fluttering in your stomach: The dreaded mortgage loan process looms large. Donâ€™t let bad news about the mortgage crisis discourage you from what has been the most frequent and tried gateway to home ownership for many decades. Very reasonable loan rates are on your side right now, and remember, behind every contract is a human being who, if he or she is a respected and trustworthy professional, has your best interest in mind.
By now you know not to make the mistake of shopping strictly for a low interest rate that sounds too good to be true. Many lenders offer low rates, but stuff their loans with hidden fees to offset the low rate. Remember to read the fine print before signing the contract. Selecting a mortgage lender should be based on his or her track record of quality of service, length of time in business and, of course, how attractive the mortgage rates are. Not all mortgage issuers operate in the same way.
Choose between three types of mortgages:
- A mortgage lender,Â be it your local bank or a national bank that specializes in mortgage lending.
- A mortgage broker,Â who represents many different mortgage lenders and shops your loan around for the right fit. Mortgage brokers only originate loans. Once you have closed the deal with the broker, the mortgage contract is sold to another lending institution that collects your payments and escrow deposits, and distributes your property taxes and homeownerâ€™s insurance premiums when theyâ€™re due.
- An online lender,Â whose headquarters may not be where you live, but it can execute home loans anywhere in the United States though its online operations.
Day for pre-qualification for a Mortgage
The paper chase:
Be prepared for your first meeting with the mortgage lender youâ€™ve selected to avoid any delays by bringing the following documents:
- A list of your credit cards you have by issuer and balance due
- Payroll stubs from the last six months
- Tax returns from the previous two years
- A list of your assets, such as:
- IRA accounts, securities, bank accounts, personal property, including jewelry and furniture. If you own other real estate, list the addresses and if you can, information about each propertyâ€™s assessed market value.
- Copies of any divorce decrees, bankruptcy discharges, student loan documents, alimony and child support obligations.
- A list of places of employment and residences spanning the last two years.
- Copies of the contract and of any earnest money checks, if you have an accepted offer to purchase a property.
Bring your check book with you to the application meeting. Itâ€™s likely your lender will require application, credit check and appraisal fees for his services. You donâ€™t want to cause unnecessary delays in the processing to your loan. Congratulations if youâ€™re prequalified, but you still have to be pre-approved by the lender. The loan officer asks you for documentation that supports the claims you made on your application. Sometimes, if he feels aspects of your financial disclosures are questionable and may make you a risky customer to the lender, a mortgage underwriter has to sign off on the pre-approval as an extra step. The good news is, these steps shouldnâ€™t cost you a penny. You can give several mortgage brokers a run for their money and let them make you competing offers. Donâ€™t give the loan officer any money for a credit check or other fee until you are sure you want to work with this person.