Applying for a Mortgage Loan

You have been to a dozen or more open houses and you have looked at homes in new developments. You have decided on the home you want to purchase. There are some steps you should follow when applying for your mortgage loan.

Review Your Credit Report

You should order your credit report from one of the three major credit reporting agencies: Equifax, TransUnion, or Experian. Your credit report determines whether you can pay off the mortgage loan you are applying for. It reflects how you pay your current debts, your outstanding balances, and the amount of money you owe. If you have good credit, this assures lenders that you can pay back the loan and you can be assured of having your mortgage loan approved.

When you receive your credit report, check it for errors. Errors do occur and you have to straighten them out before you apply. Errors could keep you from getting your mortgage loan approved or you may have to settle for a high interest rate.

Check Current Mortgage Rates

Mortgage rates fluctuate. If you look at the key economic indicators such as bonds and Treasury notes, you can decide when it is feasible for you to apply for a mortgage loan.

Research the Types of Mortgage Loans

There are conventional mortgage loans and government mortgage loans. Government mortgage loans are made through three government agencies:

• The U. S. Department of Veteran Affairs (VA)
• The U. S. Department of Housing and Urban Development (HUD)
• The U. S. Department of Agriculture Rural Housing Services (RHS)

Conventional mortgages are those from other mortgage loan lenders. When you are researching the various loan types, you should determine the following about your financial situation:

• The amount you can afford to pay monthly
• The amount you can make for a down payment
• The number of years you plan to live in your home
• Whether you can pay off the mortgage loan early
• The stability of your income and whether you can make extra principal payments

A mortgage loan for a home is a major expense and is a long-term investment. You have to make sure you can make this commitment.

Compare Interest Rates and Fees

You should research and compare the interest rates of various lenders. Ask the lenders for the definition of terms you do not understand. Ask about fees. Some mortgage loan companies may waive certain fees and add others. This could be more money than the one that was waived. Review all the fees and make sure you understand what the fees are.

Review the Loan Package

Other factors you should look at is the loan package itself. This includes the type of mortgage, the amount of the down payment, whether there are prepayment penalties, the lock-in period, mortgage insurance, payment schedule, and so on.

When you decide on the lender for your mortgage loan, there are documents you will be required to complete. There are fees that are due when an application is made such as a credit report fee, an application fee, and an appraisal fee.

The requirements for a mortgage loan vary from lender to lender and that also includes fees. Make sure you understand what will be needed when you apply.