Understanding the Process of Obtaining a Home Mortgage

Knowing what to expect when you try to purchase a home, particularly if you are a first time home buyer makes it much easier to get through the home mortgage process. You have legal rights through The Fair Housing Act and the Equal Opportunity Act that make it illegal for lenders to base your qualification or disqualification for a loan on reasons pertaining to your race, sex or national origin among other prohibited factors. There are different types of mortgages to consider, each with a variety of payment schedules and it’s important that you do your research before settling on a home mortgage provider.

Home Mortgage Shopping

Shopping for a home mortgage is similar to shopping for a new vehicle or important and costly item- you rarely take the first one you see and you spend time “shopping around”. When you are considering different mortgage providers, you’ll need to extend effort in finding a lending institution with reasonable rates and attractive terms, and avoid signing the first home mortgage approval you obtain.

Lenders of home mortgages include savings and loan associations, mortgage companies, commercial and mutual savings banks. The loans offered through each institution will have different features and different rates. Check local newspapers for Shoppers Guides that may advertise attractive mortgage rates with local institutions. Look in your phone book for mortgage companies and call or visit their website to view their mortgage rates.

Shopping around for a home mortgage is one of the few types of credit you can “shop” for without it affecting your credit score adversely for having numerous inquiries. Provided you apply at multiple lenders within a 30 day period, each instance that a home mortgage lender accesses your credit report to decide whether or not you qualify for their loan programs will only count as a single inquiry against your credit report.

Understanding Different Home Mortgage Types

There is no one-size-fits-all approach to obtaining a home mortgage. There are privately and federal insured mortgages, as well as guaranteed loans. Some loans are backed by federal government agencies, including the Department of Veterans Affairs and the Federal Housing Administration. Home mortgages that are not government insured are considered “conventional” mortgages, and may have higher down payment requirements than a government insured mortgage- but don’t offer as many limitations to the type of home or location of homes you can purchase using the money from the loan.

There are many options regarding the home mortgage term (the length of time you have to pay back the borrowed money), as well as what percentage of the total purchase price must be available for a down payment. Larger down payments and longer terms provide a home – buyer with smaller monthly payments. Some mortgage interest rates are influenced by the amount of your down payment, as well.

When considering the type of home mortgage you want to apply for, it’s important to decide whether you want a home mortgage with a fixed interest rate, or one that might change. There are combinations of fixed and variable rate mortgages, called convertible mortgages, as well. Online calculators, as well as lending institutions, should be able to provide you with details of how each type of mortgage differs from one another, and how those differences will affect how much you pay each month, as well as your chances of qualifying for a particular home mortgage.

First time home – buyers are often able to qualify for special programs and grants, as are low-income home buyers. Not all lenders will automatically provide you with the details of these programs, so it’s important that you ask about the availability of the programs as well as the eligibility requirements.

Home Mortgage Application Process

Be prepared for paperwork when applying for a home mortgage! Almost all mortgage lenders require the following information, and it’s best to gather the details before making the trip to the lending institution (or before applying online):

* Year to Date Pay Stubs
* W2’s for 3 or more prior years
* A list of current debts (including account numbers, how much is owed, and an address for each creditor)
* Purchase contract for home you wish to buy

It’s common for a mortgage loan application to take up to 30 days or more for approval or denial- with mortgages under the VA or FHA programs taking even longer. Many home buyers prefer to get “pre qualified” for a home mortgage prior to finding a home to buy and before physically applying for a home mortgage- as this process will provide you with an estimate of how much money you will be approved to borrow for the purchase of a home.