5 Steps To Attaining A Mortgage


If you're serious about buying a home, cleaning up your credit should be the first item on your agenda. After going through your credit report, identifying, paying off and closing most of your credit cards, your next step is to shop for a mortgage. In this article, we'll go over the preliminary steps of getting pre-qualified and/or pre-approved for a mortgage, and then we examine the different types of lenders.

1. Pre-Qualification

To pre-qualify for a mortgage, you meet with a lender and provide information about your assets, income and liabilities. Based on that information, the lender will roughly estimate how much money you can borrow. The entire process is informal. The lender does not verify the information provided, nor charge you a fee, and he does not formally agree to approve a mortgage for the amount you are pre-qualified to borrow.

2. Pre-Approval

The pre-approval process is more formal than the pre-qualification process. With pre-approval, the lender checks your credit, verifies your financial and employment information and confirms your ability to qualify for a mortgage. Pre-approval strengthens your position to make an offer when you find a property that you like - sellers are generally more willing to accept offers from pre-approved buyers, who have already shown that they can actually afford to purchase the house.

3. Choosing a Lender: Mortgage Brokers

Mortgage brokers are responsible for helping more borrowers obtain loans than any other source. They have access to a large number of mortgage providers and shop the marketplace on behalf of their clients. Mortgage brokers can be particularly valuable if you have damaged credit or are in the market for an unusual type of loan. Of course, mortgage brokers don't work for free, and their fees can sometimes be excessive. Be sure to look before you leap. The time you spend comparison shopping could save you hundreds of dollars in commissions and document-processing fees.

4. Choosing A Lender: Banks

Banks are a traditional source of mortgage funding. If your local bank offers a good interest rate and attractive terms, there's no reason not to take the loan. If they don't, there are plenty of other banks in town. The primary drawbacks to working with banks is that each bank generally offers only a limited number of mortgage programs, and banks are not usually flexible when it comes to negotiating fees.

5. Online Loans

Shopping online has become an increasingly popular method of gathering information and obtaining loans. It's quick, convenient and enables you to contact multiple vendors simultaneously. You don't have to leave home, and you can shop anytime, day or night. Even if you ultimately get your mortgage from a bricks-and-mortar establishment, the data gathered from online vendors will provide a wealth of information for comparing loans and negotiating terms.

The Choice Is Yours

When shopping for a mortgage, there are a variety of loans, vendors and methods of shopping. The best way for each homebuyer to approach the process is largely a matter of personal preference. Some homebuyers are looking for the lowest-priced program, while others prefer the most convenient. Personal relationships and specific loan requirements also play a role. While there is no right or wrong method, a little advanced planning and careful shopping will be well worth the effort.
Related Articles
  1. Home & Auto

    5 Luxurious Ways to Boost Your Home's Resale Value

    Not all renovations are created equal. Here are five that are most likely to make a property appreciate (and be appreciated by househunters).
  2. Insurance

    What is a Force Majeure?

    A force majeure clause frees both parties in a contract from fulfilling their obligations in the event of some catastrophic or unexpected occurrence.
  3. Credit & Loans

    Explaining Equated Monthly Installments

    An equated monthly installment is a fixed payment a borrower makes to a lender on the same date of each month.
  4. Investing Basics

    Tiny House Movement: Making Market Opportunities

    The tiny house movement throws all assumptions about household budgeting and mortgage management out the window, and creates new market segments too.
  5. Investing

    Where Should I Keep My Down Payment Savings?

    While saving up for a down payment, where should you keep your money. A bank? The stock market? It all depends on your timeline.
  6. Credit & Loans

    Questions To Ask Your Mortgage Lender

    When buying a house, avoid nasty surprises by asking the right questions about your mortgage lender's qualifications and the mortgage process.
  7. Home & Auto

    The Most Expensive Neighborhoods in Manhattan

    Understand why Manhattan has some of the priciest residential real estate in the world. Learn about the top four most expensive neighborhoods in Manhattan.
  8. Home & Auto

    The Most Expensive Neighborhoods in Los Angeles

    Understand the layout of the greater Los Angeles area and what is driving up home values. Learn about the top eight most expensive places to live in LA.
  9. Personal Finance

    Should You Renovate or Move?

    Besides cost, what factors should you consider in deciding whether to remodel your home or move? This tutorial guides you through the steps.
  10. Home & Auto

    4 Home Upgrades That Don’t Pay

    Many remodeling projects sound good in theory, but don’t recoup their costs when it’s time to sell the house.

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!