How to Choose a Mortgage Apply and get a Mortgage

Getting a mortgage is one of the biggest financial and life decisions you will ever make, and it’s important to make sure you educate yourself on the process.

If you are considering buying a house, one of the first things you should do is to check your credit score. Black marks on your credit score could lead to a higher interest rate or not being able to get a mortgage at all.

The second thing you should do is meet with a couple of lenders to get pre-qualified. This will give you an idea of how much house you can afford and will also help expedite the process when you eventually decide to make an offer. Your first stop should be your own bank, because they may offer promotions that benefit their own customers, such as a quarter point rate discount or a discount on closing costs. But make sure to shop around, because different lenders have different underwriting standards and you could get a better interest rate on the same mortgage. One warning, though. A lender may pre-qualify you for much more than you thought you could afford. Don’t get sucked in. Stick with the amount you are comfortable with, because you know your situation better than anyone else does.

When you have made an offer and are going through the process of closing the deal, there are a lot of variables to consider.

First, what kind of loan do you want? Though there are dozens of variations, most loans either have a fixed interest rate, meaning it will never change as long as you have the loan, or an adjustable rate, which may change yearly, or at some other time. With the slumping housing market and slowing economy, now is not a real great time to get into an adjustable-rate loan, unless you have a specific situation, such as a spouse currently not working but but planning to return to the workforce in a year or two, that warrants such a loan. Your general rule should be if you can’t afford the payments with a traditional fixed loan, then you can’t afford the payments period.

Also, if you don’t have the traditional 20 percent down payment,you’re probably going to either have to get a second mortgage or carry mortgage insurance. Both have pluses and minuses that need to be considered carefully.

Second, make sure you understand all the fees involved in getting a loan. There are closing costs such as appraisals, inspections, title fees, doc stamps, etc. There are different rules in different parts of the country as to which fees are paid by buyer and seller, but expect to pay a fair amount of fees. Also make sure you are accounting for taxes and insurance when figuring your mortgage payment. The easiest and most common way to do this is through an escrow account, which can be set up by your lender.

Other things to consider when choosing a mortgage include whether there are any prepayment penalties, how easy it is to make additional payments or pay extra on the principal amount, whether the mortgage is assumable by someone else and whether your lender will hold the mortgage or sell it on the secondary mortgage markets.

If this all sounds very scary and complicated, that’s because it is. While the vast majority of loan officers and mortgage brokers are knowledgeable and ethical and will hold your hand through the process, you can protect yourself by learning all you can about the process. beforehand.