Hardly anyone has the money to purchase a house outright with cash. This makes mortgages essential for many homeowners. A mortgage is most likely the largest debt you will ever take on in your life, and it could take up to 30 years to pay it off. For that reason, it's important to get the best interest rate possible. Doing so could save you tens of thousands of dollars over the life of your loan. But even the process of getting a loan is difficult, and it's wise to know what to expect.
Step 1
Determine how much you can afford to put down on a home. Look over your finances, including how much money you have set aside for a down payment and how much monthly income you can allocate to mortgage payments. You could also sit down with a mortgage lender and go through a pre-qualification process, wherein the lender reviews your financial situation and pre-qualifies you for a certain amount that you may be able to get for a mortgage. The downside to this option is that the pre-qualification amount isn't guaranteed--you still have to go through a mortgage application process, and you might get more or less than expected.
Step 2
Meet with various lenders and review some of the financial terms of their mortgage opportunities. The most important variable is always the interest rate on the loan, since it will cost the most money by far. Narrow your options to the lowest few interest rates, then go over some other costs, including closing costs, prepayment penalties, application fees and home appraisal.
Step 3
Consider using a mortgage broker if you are struggling to find a lender that will give you a mortgage with the terms that appeal to you. While lenders are working with their own in-house money and rules, a mortgage broker can deal with a number of lenders in an effort to find a deal that might appeal to you. You will have to pay broker fees for this service, but a good mortgage broker should be able to find an excellent house loan option for you, relieving you of doing a great deal of research.
Step 4
Apply for a mortgage with the lender of your choice. This is the easiest part of the process, but it is still a tedious task. The application will require you to tell about your job, including length of employment, income and stability.You will have to list all assets owned as well as debts owed, including auto loans, credit card debt and student loans. You will have to provide pay stubs, tax returns and forms, investment reports, bank account statements, proof of various insurances, and anything else required by your lender. The lender will run a credit check on you to review your financial history, and you will then be informed whether you qualify for a loan that meets your needs. Once the loan has been approved, you are free to proceed with the final steps of purchasing your home.
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