Mortgage Q&A: “How to get a mortgage?”
If you already know what a mortgage is, you may be wondering how to obtain one. In short, a mortgage is just another way of saying a home loan.
Of course, 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 (home equity line of credit).
Are You Able to Get a Mortgage?
Regardless of type, the first step to getting a mortgage is figuring out how much you can afford, or if you even qualify. Mortgages are a privilege, not a right. So before you begin to shop around, you need to determine if you’re eligible.
The best way to accomplish this is by figuring out your debt to income ratio. At the same time, you’ll want to organize all your assets and take a hard look at your credit score to make sure it’s in good shape.
Once you’ve done all your homework, you can start looking for a 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.
If the mortgage is for a purchase, you’ll also need to get pre-approved to show the home seller (and their real estate agent) that you’re a serious candidate (pre-qualification vs pre-approval). They surely won’t want to waste their time with ineligible borrowers.
Where to Get Your Mortgage
- 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
- Zillow’s Mortgage Marketplace
- Contact your investment bank
- Speak to a housing counseling agency
- Ask your real estate agent
I’d guess that most prospective and current homeowners seeking a mortgage would go to their bank or credit union first. After all, if you keep your money with them, there must be a certain level of trust and some kind of relationship.
That relationship could equate to savings and special deals on a mortgage, and perhaps a streamlined process. If they already have information about you, they may be able to assess your borrowing profile more easily, and get you an answer sooner.
However, a bank or credit union is only as good as the loan programs it offers. In other words, you’re stuck with whatever they’re selling. This might mean you can only get a fixed-rate mortgage, or the loan-to-value may be capped at 80 percent.
If you want more options, consider a mortgage broker. They work as middlemen between banks and borrowers, and can offer loan programs from an infinite number of lenders.
For example, a mortgage broker may be able to get you mortgage rate quotes from Bank of America, Wells Fargo, Chase, and many others, all at the same time. Then you can compare them side by side.
To ensure you don’t miss out on anything, you can speak with both your local bank/credit union and a mortgage broker (or two). And grab a quote or two online while you’re at it. That way you can compare mortgage rates, programs, closing costs, and more to determine which is best for you.
If you’re buying a home, chances are your real estate agent will “know someone.” Just take their recommendation with a grain of salt, because it’s likely referral business, and not necessarily in your best interest.
You can also visit a local housing counselor to discuss your options and ideally get some education on the home-buying process while you’re at it.
The Mortgage Loan Process
In return, they are required to provide you with a Good Faith Estimate and Truth in Lending disclosure within three days of loan application. This is essentially a loan summary and an estimate of the charges you’ll incur upon settlement of your loan.
After everything is submitted, it will take anywhere from a few days to a couple weeks to get a decision on your loan. Generally it doesn’t take too long, but ever since the mortgage crisis things have gotten a little backed up.
Assuming you get approved, you’ll be issued a loan approval with a list of conditions that must be met before loan documents are released.
Once you satisfy these and receive your loan documents, they must be signed and a list of funding conditions must also be met. Once they are satisfied, your mortgage will fund. Yes, it sounds like a lot, and it is, but mortgages are no joke folks.
If for some reason your loan application is declined, you can make an appeal with the bank that denied you or apply elsewhere. In some cases, you may need to restructure the loan or simply wait until your credit/asset/employment outlook improves. Not everyone is eligible for a mortgage…
Read more: What mortgage rate can I expect?