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Applying For A Mortgage? Consider These Tips First!

Applying For A Mortgage? Consider These Tips First!

Owning a home is something almost everyone hopes to achieve one day. But understanding the particulars of applying for a mortgage can be a bit complicated. Applying for a mortgage can be a scary process if it’s your first time. We’ve put together a few helpful hints to make it a bit easier for a first time home buyer.

Get Pre-Approved For A Mortgage

Before outright applying for a mortgage loan, it may be best to get pre-approved for one first. When you get pre-approved for a loan, you will find out how much your monthly payments and other costs would be. Getting pre-approved will also let you compare various lenders and how much you might be able to borrow. By getting pre-approved for a mortgage it can help you immensely when it comes time to apply for the mortgage.

Mortgage Loans & Credit

Check out your credit report and rating before you apply for a mortgage loan. Many lenders are being more strict with their credit standards than they were in the past, so having the highest possible credit score will help improve the type of loan you can secure.

All lenders want to see a good credit history and a good debt-to-income ratio so that they feel secure when making a loan. If you do have any major outstanding debts or missed payments on your history it’s important you take care of them and stay out of debt for at least a year before applying.

If you’re having trouble with your credit, consider hiring a consultant to help you with the process or sign up for a service like Lexington Law to naturally raise your score.

Finding A Mortgage Lender

There are a number of ways to find a mortgage lender to work with. If you have an existing relationship with a bank or credit union that may be a great place to start. If you don’t have an existing relationship with a bank but are thinking of starting one, take out a smaller loan first or open a line of credit.

Make sure to stay on top of all of your payments to demonstrate to the lender that you’re a responsible borrower. You should also create a personal relationship with a personal banker if you can. When it comes time to secure your mortgage, having them in your corner will only help.

If you are unsure of the right bank to work with, speak to friends and family members that own homes. Find out who they’ve worked with, what kind of rates they pay, and what their experiences securing a mortgage were like. Chances are good that they’ll have some great information you can use to get started on your home buying journey.

If you find yourself getting rejected by all of the banks you reach out to, you can think about using a home loan broker. A home loan broker works to pair borrowers and lenders, and are able to secure loans by utilizing their existing connections. You should understand that if you are having a difficult time securing a loan directly from a bank that it’s likely you’ll be paying a considerably higher rate for your loan.

Understanding Mortgage Fees

Make sure you do your research regarding mortgage fees. There are a number of different fee structures that are available depending on what you qualify for. For example, two of the more popular are adjustable-rate mortgages and fixed-rate mortgages.

With an adjustable-rate mortgage, the interest rate that you pay can change after a certain amount of time. There are a number of factors that cause the rate to change, but it’s usually based on an index which reflects the cost to the lender of borrowing on the credit markets.

Adjustable-rate mortgages aren’t inherently good or bad themselves, but they can become very expensive for a borrower in a bad market. If the market takes a swing for the worse, your rates can go up considerably. If you are then unable to make your payments, you can risk losing your home.

A fixed-rate mortgage is exactly the opposite of an adjustable-rate mortgage. The interest rate that you agree to when you take the loan is the interest rate that you will continue to pay for the life of the loan, no matter the state of the market. A fixed-rate mortgage is a far safer bet, however, it may have a higher starting rate, making it less attractive.

You can also use a tool like a mortgage calculator to get a better idea for how expensive of a home you can afford. Understand that mortgage calculators are not exact, so the numbers you get should be taken with a grain of salt.

Applying For A Mortgage

Once you’ve figured out your loan amount and the lender you’re going to work with, it’s time to apply for a mortgage. It’s important to understand that a lender is going to ask for a lot of paperwork from you. Complete and submit the documents accurately and quickly so that you don’t hold up the process. Also, be sure to include every document and every detail that is asked for. This will streamline the process for all involved parties.

It’s also a good idea to have a property appraiser appraise the property before securing your loan. This will make sure that you are taking out a loan on the appropriate value of the home, not just the asking price.

Applying for a mortgage can be one of the most stressful parts of the home-buying process. But if you do your homework and work with a good lender, it’s not hard to feel comfortable with the mortgage process.