Most people do not know how to find a mortgage properly, and have little idea of how to lock in a rate. Seeking the best mortgage for your needs is no longer a matter of choosing the lowest interest rate. There many other factors to take into consideration. Here are some generalized suggestions that will be of use to you if you need to know how to find a mortgage.
Analyze Your Financial Situation
Be brutally honest with yourself in every aspect of finding a mortgage. Check your finances, including:
- Your total income (the joint income of you and your partner can be used if the property is being registered in both names and you intend have a joint mortgage. Each of the factors below must also then be stated on a joint basis.
- Your total debts: car loans, personal loan and any other debts you may have.
- Your essential outgoings: taxes deducted from your net income (after income tax), insurances, utility bills and so on.
- Credit card debts and repayments
- Your projected obligations and income over the next 30 years. This is not easy to do, but the lender might request some form of assurance of continuation of income. If you expect annual increases in income, then this information will help the lender make a decision.
A lender might offer you a mortgage that they are prepared to lend, but that you might feel is too much for you to afford. Sometimes it is best to refuse, rather than place yourself in financial difficulties from the outset. Maybe you can negotiate a lower rate of interest, wait a while until you can make a larger down payment or perhaps go for a less expensive home meantime until you build some equity.
How to Find a Mortgage: Look For Lenders
You can use either mortgage lenders or brokers when shopping around for mortgage loans:
Brokers: They have access to a number of lenders, but you pay for their services in the sum you borrow. Brokers can get you the best mortgage deal for your given details and needs and are frequently well worth their fee.
Direct mortgage lenders: They will offer you one of the limited loans they can offer. However, you can negotiate with the lender for better options. You cannot negotiate with brokers who are conduits from lenders, but not to them.
When trying to find a mortgage that suits you, you will have to consider interest rates, loan periods (15 or 30 years), points (you can pay for points, each point removing 1% from your interest rate), appraisal costs, broker fees, application fees and more. Many people decide that leaving all that to a broker or mortgage consultant is best for them – a good mortgage consultant can save more than they cost.
Lock in a Rate
Try to lock in a rate. An interest rate lock guarantees your interest rate, at least for the period of the lock. Also lock in the costs and make it an ‘on application’ rate lock rather than ‘on approval.’ Then you know your interest rate in advance. You should lock in a rate for as long as possible. Although rarely, it can take up to 2 months to settle and complete the mortgage, so a 60-day lock would be ideal if you can get it.
Once you have an agreed interest rate locked in, and hopefully other costs included, follow up your mortgage application. If you are approaching your time period, keep pushing for approval and try to find the reason for any delay. Once you lock in a rate it is important that you get approval for the mortgage and close the real estate purchase prior to the time limit.
Shop around for interest rates and mortgage deals. If you have analyzed your own finances properly, you should not find yourself unable to meet the repayments. However, what some people forget are the closing costs.
Knowing how to find a mortgage to suit your financial ability to make monthly payments is all very well. However you must also be prepared for the lump sum payments. At closing you must pay your down payment, one year of homeowner’s insurance, agent fees and seem others. Make sure you are aware of what these are.
Under the Truth in Lending rule, you agent must inform you upfront of the fees you will have to pay. Nothing can be hidden and sprung on you at closing. These are the fundamentals of how to find a mortgage. Find a lender, get the lowest prices and lock in a rate. It sounds easy, but make sure you know what you are doing.