If you have decided that it’s time for you to buy a house, there is one big hurdle you will need to overcome and that is getting a mortgage. While there is no shortage of mortgages, it may sure seem that way when potential lenders start to grill you.
The best time to apply for a mortgage is actually before you go house hunting. This will give you an idea of how much house you can afford in the eyes of the lender as well as a better idea of just what you can expect to pay monthly. However, before you call or visit a prospective lender prepare yourself and do your homework. Note: You will have additional hurdles if you have a low down payment, a low credit score, a high debt-to-income ratio, or a small cash cushion so check for these first.
Start by getting a copy of your credit report. Report any errors to the credit bureaus so they can be corrected before you go to a lender. Then create a budget to determine how much you can really afford to pay each month. You can use one of the calculators on sites like Bankrate.com to determine what this translates to in terms of a house price. Then stay in your safe zone. This is not the time to stretch your budget into a bigger house than you can afford. Next, check out prospective lenders. Rates are a good indicator but they are not the only indicator to look for in a prospective lender. Some other things to look for include:
- The lender’s reputation in dealing with customers. Thanks to the internet you can find comments and other information before you call them.
- Look on their website to see the types of mortgage options they have available. There are so many possibilities. Take some time to get familiar with some of the terms so that you can ask follow up questions and make informed decisions. Once you become familiar with the options make some initial decisions like whether you want a fixed mortgage or an adjustable one. There are pros and cons to each, make sure you know the difference before making a final decision.
- How receptive they are to you and working with you. If they start out by pointing out all of your flaws in terms of credit or income then this might not be a good fit. Or this might not be a good time for you to get a mortgage. It is much tougher to get a mortgage today so be prepared to jump through some pretty tall hoops but rudeness and poor customer service don’t have to be a part of the process.
Finally, be aware that most lenders will want to run a credit check before you get too far in the process so do your homework to minimize the number inquiries and try to do them all within a 30 day period. Inquiries like these will lower your credit score and possibly cause you to pay a higher rate, however when you can keep them within a 30 day period they don’t take off as much. ps!