Five Things You Must Know Before You Apply For a Mortgage Loan
Mortgage Regulations Continuously change and any slight change in regulations can and will affect the way in which you approach mortgage shopping and what programs you’re able to use. The smallest variation in the way your mortgage is structured can either cost you money or save you thousands of dollars in expenses. Whether you are about to purchase your very first home or are upgrading it is crucial that you educate yourself to make an informed decision.
These five issues are important and carefully planning will make your payments work harder for you.
1. Get a preapproved mortgage BEFORE you go looking for a home. A pre-approval is easy, and can give you peace-of-mind when shopping for what will be one of the largest purchases you’ll make in your life. A preapproval is a 3-step multilayered process.
- You would fill in all of your information and the loan processor takes a look at it, they will then pull your credit.
- If everything checks out with your credit score the loan processor will ask for more information such as your 2 most current documents for paystubs, tax returns, w2’s and bank statements with all the pages
- Once all that information is reviewed the loan processor will issue you a pre-approval letter stating what you qualify for and their current rates. You’re all set.
2. Know what monthly dollar amount you feel comfortable committing to. When you discuss mortgage preapproval with the lending institution they will tell you what you qualify for, but also determine for yourself what you are comfortable with committing to.
3. Clearly understand what prepayment privileges and payment frequency options are available to you. The more frequent your payments are, the more you literally cut down the years of your mortgage. Prepaying saves you thousands of dollars in interest for your mortgage; however, not every mortgage has prepayment privileges so talk to your lender about this option.
4. Ask if there is a rate lock option for your mortgage. Interest rate locks periods vary, normally for 30-60 days. Anything longer than the rate lock period you would have to pay for an extension. Rate locks are for the contracted house. If for whatever reason you move on to a different property/contract you’ll have to relock your rates at the current rate.
5. Mentally prepare yourself for what’s about to take place. Be ready to provide documentation for the smallest things. If you were ever late on any payments, receiving money from family members all trigger the underwriter and they will be calling for an explanation. Having these letters already prepared will smooth out the process. Also be aware that during the purchase of a home, it can be exhausting and sometimes feel overwhelming. Do not give up, I promise that at the end you’ll have forgotten everything you’ve went through and will then be a happy homeowner!
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