If you’re seriously considering buying a home, then one of the most important first steps you must make is making sure your credit score/report is cleaned up. Once you’ve gone through your credit report and made sure all of the information included within its sections is correct, then you must start the sometimes frustrating process of applying for a mortgage. While there are many elements that go into obtaining a mortgage, there are several essential and effective steps you can take to help make this process a little easier.
Step #1: Become Pre-Qualified for a Mortgage
This is perhaps the best-case scenario for many aspiring home buyers. In order to become pre-qualified for a mortgage, you must meet with a financial lender and provide them with detailed information regarding your liabilities, income and assets. Based upon this surface-level information, the financial lender can then estimate how much money you can feasibly borrow.
It’s important to know that this is an entirely informal process, and the lender typically doesn’t verify the information you provide or charge for this service. Moreover, just because you’re pre-qualified for specified amount of money doesn’t actually mean you’ll be approved for that amount. Many home buyers are confused as they think a pre-qualified amount is a loan guarantee ñ this is incorrect. Rather, the sum that’s delivered to you is a rough estimate of what you can expect a lender to provide.
Step #2: Become Pre-Approved
Unlike the pre-qualification duties, in order to become pre-approved you must provide detailed documentation to a financial lender, which is then verified. This is an important step to obtaining a mortgage as it provides you with a stronger position when it actually comes time to making an offer on a home. Generally speaking, home sellers are more likely to accept your offer should you already be pre-approved for a specific amount. This clearly demonstrates you have the financial ability to purchase the home.
Step #3: Selecting a Mortgage Lender
While it’s not possible to clearly state one lender is better than another, it’s important to work with your mortgage broker to help obtain a good choice for your specific financial situation. Traditionally, banks are the primary lenders for mortgage loans. Take some time to review offers from several different financial institutions. While this may be the easiest step, there’s little negotiating room when it comes to fees. Regardless of where you choose to obtain a mortgage loan, make sure the loan clearly details fees, interest rates and any other variable that’s important when it comes to this important and long-term financial decision.