What is a mortgage
Date: December 29, 2015 Author: Damon Harris
For most of us, before you bet a home you have to first get a loan. In the home buying world that loan is called a mortgage. Mortgages serve different purposes – some are used to purchase a home and others are used to refinance an existing mortgage. You may even open a second mortgage behind an existing first mortgage to tap into the equity of your home
Regardless of type, the first step to getting a mortgage is figuring out how much you can afford, what you can qualify or even if you are able to qualify at this time.
Figure out Debt to Ratio
There are ways to “kinda” see if you can get a mortgage and what you can afford without talking to a lender. But keep in mind you need the entire picture of your income and credit. But until you do that you can first figure out your debt to income ratio.
Assets & Credit
Buying a home is all about leverage. That leverage is assets and credit. You will want to organize all your assets and take a hard look at your credit score to make sure it’s in good shape. Even if you think your credit is shaky, check it and speak to a professional about it. Don’t disqualify yourself.
QUICK TIP: You can request a free copy of your credit report from each of three major credit reporting agencies – Equifax, Experian, and TransUnion – once each year at AnnualCreditReport.com or call toll-free 1-877-322-8228. You’re also entitled to see your credit report within 60 days of being denied credit, or if you are on welfare, unemployed, or your report is inaccurate.
Get Your Paperwork Together
Your finances will be under the microscope, so make sure you have everything you need to back up the numbers.
Have you opened a bank account in the past six months? Have you been gifted any money recently? Have you sold any big items? Be prepared to tell the lender why.
Gather up these documents:
Two forms of government identification
Two years of tax returns
Two years of income statements
Proof of all assets
Contact a lender
Once you’ve done all your homework, you can start looking for a bank, mortgage lender, credit union, or mortgage broker to work with. They can get you pre-qualified to help determine how much you can borrow and at what interest rate, at least a ballpark figure.
QUICK TIP: WHERE TO FIND A MORTGAGE PROFESSIONAL
Contact a mortgage broker
Check out an online mortgage lender
Visit a local mortgage lender/banker
Visit a local retail bank
Visit a local credit union
Contact your investment bank
Speak to a housing counseling agency
Ask your real estate agent
While a pre-approval won’t guarantee you a loan, consider it a diploma of the mortgage process.
During pre-approval, the lender will do a credit check and go over your income statements to determine your financial capability.
It’s recommended to go to at least three lenders to ensure you get the best deal possible.
QUICK TIP: Ask your lender about ay mortgage programs. If you don’t have one give our friend Stacy Barclay at C&F Mortgage a call.
Once you have your pre approval letter you can start the real work of finding a house. Remember your preapproval is just a guideline. If anything changes or comes up during the closing process it could affect the status of your loan. So maintain everything until the loan closes and you have the keys in your hands.