Every day there are countless articles published about the status and trends of mortgages. It’s easy to find out where rates currently stand or where they are likely going. Unfortunately there are many first time buyers out there that don’t understand how to actually obtain a mortgage for purchase of a property. The good news is it’s not as cumbersome as it may seem.
The first and most important step, in my opinion, is getting your credit reports and credit scores from all three credit bureaus. Your three credit scores will ultimately be the most important criteria a bank will use to determine your credit worthiness. Without being armed with this information, you will not know whether or not you can qualify for a bank’s advertised rate, or if you must settle for a higher rate because of blemishes in your credit. Finding those blemishes, clearing them up, and finally removing them is another reason you should get yourself acquainted with you credit reports. Oftentimes one bureau will have old or erroneous information that can make your score with them much lower than the others. This low score can keep you from obtaining a credit card, car loan, or mortgage. If you are aware, you can request a review of the account at question, providing whatever verification you have, and have the issue corrected and your score adjusted. Many skip this step and go directly to a lender or broker. By doing this you can make yourself a target for fraud. Shady lenders and brokers have been known to push people into higher rates so they can gain more money on your loan, or get paid more for your agreement to the mortgage. If you know what you are worth credit-wise, then you can protect yourself from these types of practices and get the rate you deserve.
The next thing you should do is determine what rates are available. Rates fluctuate daily based on market conditions. What is offered one day can change, sometimes drastically, the next. One of the best ways to determine what the national or local averages are is by going to sites such as www.bankrate.com. There you can see what someone with your credit score range can expect to receive when they apply for a mortgage. You can also compare mortgage offers from banks and credit unions in your area based on all the relevant information such as the rate, the APR, and the fees involved. Banks can sometimes manipulate some of these numbers to make it seem as though you are getting a better deal than you actually are.
Once you know your credit situation and are versed on the mortgage rates available, you should go speak to at least three different lenders or brokers. Establishing a direct relationship with a lender can often times help you make your decision easier when rates are similar. If you find someone who you feel comfortable with, it can make a long term relationship with that bank much more enjoyable. Look for someone that can explain what you should expect from the process of applying for a mortgage with them. They might offer different programs that can be more advantageous or appealing to you based on your specific needs or situation.
Lastly, there are programs out there both nationally and locally that you may qualify for. There are veteran programs, first-time home buyer programs or even regional programs – just for buying in a particular area. You may qualify for a rate that may be lower than others might receive. They may even offer closing cost or down payment assistance. In some areas of the country they offer buyers free land! You want to be aware of what may be available to you because lenders likely won’t tell you that you qualify for something better than they can offer you. You’re going to have to find this stuff out on your own.
Brian D. Inocencio is a Realtor in the state of Rhode Island.