Step 2: Getting a Mortgage

THE PRE-APPROVAL PROCESS

Before considering a real estate purchase, it is important to evaluate your financial position, confirm your budget, familiarize yourself with mortgage options, select your preferred lender and secure a pre-approval from your lender.

ESTABLISH YOUR MONTHLY BUDGET

As a general guideline, total monthly housing costs for your primary residence, including mortgage payment, taxes, insurance, interest, utilities and other associated maintenance fees, should not exceed 32% of your gross monthly income.

Certainly, there are no hard fast rules when it comes to your comfort level, and you should discuss your options with your financial advisor and mortgage lender to determine what makes the most sense based on your unique situation.

YOUR DOWN PAYMENT

There are many types of loan products available to ranging from zero down for eligible Veterans, to 3.5% for FHA qualifying loans, to 5%-20% down conventional loans.

If your down payment amount is less than 20% of the total purchase price, you will need to purchase mortgage insurance that guarantees the debt against default. Most often, this is added to your mortgage loan and/or monthly payment.

Your down payment may come from your savings, from gift monies or inheritance, a 401k program or investment portfolio, or elsewhere. Explore the options available to you and together with your lender make the selection that works best for you.

SELECT A LENDER…or TWO

You may have a great relationship with your banker and enjoy working with a particular bank. The mortgage specialists available to you within your bank branch are great to work with, but take note that most are limited to working the hours the bank is open.

Another option that tends to work well with the fast and sometimes frenzied pace of real estate is working with a direct lender. A direct mortgage lender is based outside the bank often working with many different banks and investors to provide the most competitive options, offers greater mobility and accessibility, and will be available to you in real time as a transaction (from making an offer to closing) unfolds.

If you do not know of a direct lender, feel free to ask me for suggestions. I can recommend a professional who has helped many of my clients personally in the past.