Preparing to Shop for a Mortgage Loan

Are you looking to purchase a home or do you want to refinance your current mortgage to a lower interest rate? If so, ask yourself a few questions before signing on the dotted line.

What Is My Credit Score?

One of the first things a borrower should understand before moving forward with any credit application is what your current credit looks like. Are there any erroneously reported items? Are there credit items that are correct but need to be addressed? To put yourself in position to get the lowest rate available, it is in your best interest to do your credit homework.

What Is the Current Mortgage Rate Environment?

It is important to understand where rates are when you are considering a new mortgage or a refinance. You should find out what the interest rate range is, as well as the volatility of the market. Mortgage interest rates move with Treasury notes and bonds as market conditions change. Find out where the rates are hovering and be aware of the overall market volatility. You can use this information to help you calculate an affordable payment.

Mortgage Loan

What Can I Afford?

Whether you are purchasing a new home or refinancing your current residence, you must take an honest, objective look at your goals and what you can comfortably afford. Understanding the following items will help you find the best type of loan for your situation.

Affordability Checklist

• What is the stability of your income? Is it going to rise over time?
• How much money do you have available for a down payment? (Make sure you also maintain some reserves)
• How does your estimated mortgage payment (don’t forget to include taxes and insurance in your calculation) affect what you can afford, when combined along with your other debts such as car payments, student loans, and utilities?
• How long do you intend to live in this home?
• If you are purchasing a home, evaluate where you would like to live. Is the price range in your chosen neighborhood affordable, based upon what you know so far?

Begin Shopping For a Mortgage

Begin by comparing products and interest rates from different lenders. A fast and easy way to do this is via the Internet. The Internet allows you to compare lenders side by side using the same loan scenarios. As you are comparing similar products, look at the interest rate, fees charged by the lender, and the annual percentage rate (APR). If you have used the Affordability Checklist in this article, you can start to understand what product is best for you. Mortgage products range as follows:

• Loan Term – 15 or 30 year amortization
• Product Type – Conventional or government loan
• Rate – Fixed rate or an adjustable rate mortgage (ARM)

If you have questions along the way, lenders are eagerly waiting to assist you with your mortgage financing questions.  Doing your homework in advance will better prepare you to make your most informed mortgage loan decision.