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.
Mortgages serve different purposes – some are used for the purchase of a home and others are used to refinance an existing mortgage. You may even open a second mortgage behind an existing mortgage to tap into the equity of your home (home equity line of credit).
What Can You Afford
Either way, the first step to getting a mortgage is figuring out how much you can afford, or if you even qualify. 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’ll provide you with a pre-qualification to better help you determine how much you can borrow and at what rate, at least a ballpark. If the mortgage is for a purchase, you’ll also need to get pre-approved to show the seller you’re a serious candidate (pre-qualification vs pre-approval).
The Loan Process
Once you’re actually ready to apply for a loan, the bank or mortgage broker will pull your credit and ask you to provide documentation for the loan.
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 after the mortgage crisis, things got 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.
If 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.
Where to Get Your Mortgage
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. Then you can compare them all .
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). That way you can compare mortgage rates, programs, closing costs, and more.
