How do I get a Mortgage?

Most people who want to buy a home cannot afford to buy it outright. Instead, home buyers get a mortgage. A mortgage is a type of loan that allows the buyer to purchase the house and then pay the bank back over the course of 15 to 30 years. To get a mortgage, you must first organize your finances and shop around. Then you can get pre-approved for your loan, pick out the home you want, and finally obtain the mortgage.

Before you call a mortgage lender and attempt to get a mortgage, you should first get your finances in order. Start by finding out your credit score. Federal law allows you to request a free credit report once per year from each of the major credit reporting agencies. This report will not only show your credit score, but will also tell you about any unpaid bills or delinquencies. Do your best to take care of any issues that show up, because lenders are more likely to lend to people with good credit.

Next, figure out how much you can afford to pay toward your mortgage per month. Keep in mind that your mortgage payment will be more than just the cost of the house divided over 30 years. It will also include interest, homeowner's insurance, and property taxes. A general guideline is that all of these expenses should add up to less than 30 percent of your monthly income. Many web sites offer free mortgage calculators that can help you estimate these expenses.

You should research the three basic types of mortgages to find out which one is right for you before you attempt to get a mortgage. A fixed rate mortgage has a monthly payment that stays the same for the life of the loan regardless of whether interest rates change. In contrast, after an initial hold period, the payments on an adjustable rate mortgage can change with interest rate fluctuations. Finally, a balloon mortgage must be paid off at the end of a predetermined period or else renegotiated at current interest rates.

Once you know which type of mortgage is right for you, call around and find out which mortgage lender can offer you the best deal. Although interest rates are set by the federal government, lenders do have some leeway in what they can offer applicants, especially when it comes to mortgage funding fees and other costs associated with the mortgage. It is possible to pick out a home and then get a mortgage, but most people choose to get pre-approved before they decide on a particular home.

Getting pre-approved means that the mortgage lender agrees to offer you certain mortgage terms if the house you choose meets its requirements. Often the lender will require a house appraisal and inspection. Getting pre-approval shows lenders that you are serious about buying the house you are looking at and can actually afford to do so. Once you are pre-approved, you can pick out a house and put in an offer. The mortgage company will then communicate with you, the seller, and your real estate agent to finalize your mortgage.