Mastering the Mortgage Process

 by Greg Cryns

             Buying a home isn’t something most people do on a regular basis. You may be new to the entire process so it’s no wonder many first time homebuyers are terrified they’ll mess up the biggest purchase they’ll ever make in life. The golden rule of super large purchases (and 

mortgages are a commodity purchase just like a car) is to never rush into them without spending significant time studying the pitfalls and the advantages.

            Once you know the ropes, the mortgage process isn’t very intimidating at all.  You have rights as a homebuyer – fair lending rights that protect you from any crucial mistakes.

            But you do want to get the most for your investment, so educating yourself about what occurs during the mortgage process can alleviate any undue costs that you might incur.

            First, start looking at homes.  While you’re looking on the market for the physical house you plan to buy, you also want to be shopping around for the perfect mortgage.  Like the house you’ll choose, there will be pros and cons to the mortgage you pick as well.

            Most importantly, you want payment terms that fit within your budget.  Some people go straight to the bank where they have all of their accounts and sign up for a mortgage without ever looking further.

This can be a costly mistake!  You want to shop around and look at lending institutions that include banks, mortgage companies, and online lenders who compete fiercely for your business.

You want to ask questions about what types of loans are available and make sure you don’t get pushed into something you know you won’t be able to handle at a later date. 

When you find a lender and type of loan that looks attractive, you’ll begin the mortgage paperwork process.  You have to fill out the main application, provide documentation about your finances, and wait for your credit to be examined.

Expect a very thorough investigation of your current job (and your spouse's) and your job history.

An appraiser will come out to appraise the value of the property.  The lender usually sends out someone on their own (you don’t hire them) but they sometimes charge the fee back to you in the total amount of the loan.

You’ll be able to borrow about 80-90% of the value of the property and you’ll usually need to provide a down payment to make up the rest.  If the lender approves you, they’ll fund the loan.  If not, they have to explain why you were turned down and at that point, you have the option to look for another type of mortgage that better suits your financial situation.

This is being written in the Spring of 2008. This may be the most difficult period of time in US history to obtain a mortgage because so many bankruptcies are occurring because people bought into a mortgage that was not right for them.

Banks and other lending institutions have greatly tightened the noose on people. The requirements are much more stringent than they were just one year ago. In a way, you can consider this a blessing even though you may not be able to obtain your mortgage. First, you are less likely to go into bankruptcy. Second, you will learn much about the mortgage process when you apply again in the future.

Greg Cryns is the owner of Flat Fee Real Estate Guide - http://www.flatfeerealestateguide.com