Understanding the Mortgage Lending Process

I work with many first time home buyers or folks who just aren’t real familiar with the process when it comes to buying a home. Home ownership is a big investment and a lengthy process. Contrary to what some believe, buying a house isn’t like buying a car. In most cases you don’t pick out a house and move the next week. It’s a lengthy process! I’m going to give you a few quick tips to help you understand and navigate the process.

1. Get Your Credit Score Ready For The Process.

When you are considering the purchase of a new home make sure you know your credit score. When lenders give you a loan for a home they want to make sure you have the financial ability to pay the loan (Mortgage) back. You are seen as more of a risk when your credit report shows a low score.

Not everyone is going to qualify for a mortgage, but if you have a credit score over 600 you have a chance.

2. Know the Different Types of Lenders

There are many institutions who will loan you money to obtain a home. I would shop around for the best rate. A good starting point would be a lender that you already have an established relationship with. Shop around and find the best lender for YOU!

Below is a list of institutions that that often work with mortgage lending:

• Credit unions: These member-owned financial institutions often offer favorable interest rates to shareholders. And many have eased membership restrictions, so it’s likely you can find one to join.
• Mortgage bankers: They work for a specific financial institution and package loans for consideration by the bank’s underwriters.
• Correspondent lenders: Correspondent lenders are often local mortgage loan companies that have the resources to make your loan, but rely instead on a pipeline of other lenders, to whom they immediately sell your loan.
• Savings and loans: Are now a bit hard to find. But these smaller financial institutions are often community-oriented and worth seeking out.
• Mutual savings banks: Another type of thrift institution, like savings and loans, mutual savings banks are locally focused and often competitive.

3. Get Pre-Approved For a Mortgage

Very important step. I get calls from many people who wish to start looking at homes and don’t have a pre-approval letter. Before you call a Realtor or you start looking at Zillow, MAKE SURE YOU CALL A LENDER AND GET PRE-APPROVED FOR A MORTGAGE! I’ll put it in simple terms. It makes no sense to look at $250,000 homes on zillow when you can only afford a $150,000 mortgage! The pre-approval will let you know how much money the lender is comfortable loaning you on a home mortgage. I’ll give you another simple fact. Normally when you find that dream home and you are ready to make an offer to the seller. Guess what they want with your offer? You guessed it… A pre-approval letter! Sellers don’t want to mess with offers from buyers who can’t get financing so GET PRE-APPROVED!

4. Shop Around For The Best Rate and Terms

Make sure you compare rates from several different institutions to see who is willing to give you the best deal. Can you afford a 30 year vs. a 15 year mortgage? Are there any Government backed mortgages that work better for your situation? Are you able to take advantage of any down payment assistance programs? These are all questions to ask yourself. Look for a lender who is willing to explain the difference and finds a mortgage that works for your situation.

These are just a few tips to get you more familiar with the process. Please feel free to comment below or contact me HERE if you have any questions I might be able answer. I work with several lenders in the West Michigan area, so I can give you some contacts to start with.

After you complete the process and you are ready to move… Call Me to find that dream home for you!