How to Apply for a Mortgage

Applying for a mortgage can be a stressful process so it’s important to be prepared and know what to expect.

You can start preparing yourself to apply for a mortgage by paying off all of your bills on time. If you have overdue credit card payments or you have failed to make mandatory payments on other loans you may not get approved for a mortgage so make sure you consider your current credit rating before attempting to apply for a mortgage.

You can also prepare yourself by saving as much money as possible. The more money you have saved up, the bigger down payment you can make.

Both your credit rating and your down payment will determine the type of mortgage you are approved for. Personal employment information, like how long you have been at your current job, and the availability of a cosigner, who will agree to make payments if you can’t, will also decide the type of mortgage you are approved for.

When you are looking for a lender, especially if you are a first time homebuyer, you will want to ask about special programs available. Some banks and financial institutions offer programs for first-time homeowners and people with low incomes so make sure you explore all of your options.

It is essential to shop around before you start the application process. Start at banks where you already hold accounts to get an idea of what is available.

When you go looking for a mortgage lender there are certain questions you should ask.

Things to Ask a Potential Lender:

• What types of loans are available?
• Do you make privately or federally insured or guaranteed loans?
• What is the length of the mortgage loan?
• How much do you require for a down payment?
• What is the interest rate like?
• Is the rate fixed or adjustable?

Once you decide on an appropriate lender you are likely to be bombarded with paperwork. This pile of papers will include an application form that will ask for detailed information about your job and the house or property that you are looking to purchase. Lenders will need you to fill them in on your earnings, your monthly expenses, and any debts you might have. They will also have a credit bureau assess you to determine your credit history.

The lender will ask you how much you want to borrow and they will determine how much to lend you based on the value of the house or property you’re investing in (this will be determined by a real estate appraiser) and your finances.

Usually a mortgage lender will give you 80-90 percent of the appraised value of your house and they will expect the rest as a down payment on your mortgage.

Most lenders believe that your mortgage payments shouldn’t add up to more than 28 percent of your gross income, so make sure the house or property you are looking at is actually within your price range.

After you have filed your application ask your lender how long they think the approval process will take. You should expect the process to take about a month depending on market conditions and the complexity of the mortgage you are getting.

If your house or property has been properly appraised, your down payment is adequate and your credit history hasn’t been sullied by unpaid bills you should have no problem becoming approved for a mortgage.

If you do some research and go into a mortgage lender knowing all of your options and what to expect you will be able to breeze through the mortgage process.