As you will see in this brief outline, obtaining a mortgage can be a lengthy and complex process. Along the way, there are many opportunities for problems and misunderstandings.
Select a lender in whom you can have confidence and trust - one you can depend on to help you make decisions for your long term benefit. Taking time to research the lenders in your area just may prove to be the most valuable investment you will make toward the purchase of a new home.
The Best Mortgage
All lenders offer a variety of home financing options. A good lender will work with you to find what best suits your individual circumstances.
Most loan rates will not differ widely. However, differences in loan structure can result in large savings of costs to you. Loans may differ in such items as: Term (length of the loan), prepayment options or penalties, processing fees, no credit fees, etc.
While most mortgages are offered for terms of 15 and 30 years, other terms may be available. Keep in mind that the shorter the term, the less you will pay for your house over the life of the loan. However, the shorter the term, the higher your monthly payment will be. Your lender can help you decide which loan arrangements are best for you.
Finding A Lender
- Build a list of lenders. Talk to people you know who have bought or refinanced a home recently.
- professionals. Or simply look in the yellow pages under "Mortgages."
- Talk to a loan officer. Call or visit the lenders on your list. Get a feel for what it will be like to work with them and how they approach your needs. If you're still uncertain, ask for references from recent home buyers like yourself. Ask about their experience with a particular lender.
- Compare rates for similar loans. Among the things you'll want to discuss with prospective lenders are the rates they offer on mortgages. But when comparing rates between lenders, be sure the rates are for comparable loans, and remember to include fees and other costs so you're really comparing apples to apples.
It is important to verify that you lender is a member of a state association for mortgage lenders. This is a trade association made up of members engaged, either directly or indirectly, in the mortgage lending business. Each member is bound by a strict code of ethics to encourage the highest standards of conduct in dealing with the public and other members. The purposes of the association can be summed up as follows:
- Encourage among its members sound and ethical business practices in making, marketing and servicing of real estate loans.
- Inform the members of changes in government laws affecting real estate.
- Provide education to the membership and the public on real estate matters.
In a continued effort to provide consumer education and assure compliance by all members to the canon of ethics, an ethics committee is in place to provide assistance to you. If you have a complaint or need general information, contact your state's mortgage lenders association.
Before you start house hunting, it is wise to determine your price range. This can be done through the simple process ofpre-qualification. To become pre-qualified, a lender or real estate agent will use financial information you provide to estimate the maximum mortgage you should be able to obtain. The process doesn't guarantee that your mortgage application will be accepted, but it does help you narrow your search to homes you can afford.
Interest Rate Protection
When applying for a loan, you will be given an option to "lock in" a rate, thereby guaranteeing your interest rate during the processing and underwriting of your loan. It is wise to obtain a written, rather than verbal, interest rate agreement if you choose this option. The other option is to let the rate "float," allowing the final rate and fees to be set nearer the settlement date. This means your rate would be subject to market conditions at the time and date that your rate is locked in prior to the closing.
Loan Application Process
A loan officer will complete the application form and collect all information necessary to begin processing the loan. Discuss the loan program and terms best suited to your financial needs with the loan officer. Then a loan processor will verify your loan application information. The loan processor assembles your documentation for submission and final risk approval to the underwriter, who then forwards your package to a closer to prepare the closing documents. If denied, a letter outlining the reasons for denial is issued to you.
When the lender approves your loan, it is time to close. Closing the loan and transferring the title to the property are the legal procedures that are handled by a real estate attorney.