The first thing you want to do before you even start looking for a
house is to get prequalifide for a mortgage. Getting Prequalifide
does not mean you will get a mortgage, It is mostly to give your
realtor an incentive to work hard for you. If your realtor doesn't do
this, ask your realtor to recommend to you a mortgage broker. If the
broker is discouraging to you, go to another one. You are more likely
to get a mortgage though them. Their job is to get you a loan, he
will not get paid unless he gets you a loan, so a good broker will do
all that he can to help you. First he will talk to you on the phone,
and tell you everything you need to apply for a loan. This is what
you will need. I suggest that you have all of this. Sometimes you
my not be asked for all of these things, but in the long run, they will
always ask you for something they didn't ask for in the beginning,
So it is better to have it all the first time.
INFORMATION NEEDED AT LOAN APPLICATION
W-2 (2 years) and current pay stubs
If you are renting, 1 year payment history to landlord.
Latest 3 months bank statements
Employment info for 2 years
Your car payment
Your minimum payments on your credit cards
Your mortgage payment or rent
Any other loan payments
If you have a house, what you could rent it for per month.
Loan info and Leases for any other real estate owned.
Self-employed: last two years tax returns with schedule, YTD P&L
and balance sheets.
Addresses for past 2 years residency.
Photo I.D.(if required)
They are going to check your credit and figure out your income to
debt ratio. In order to get a loan; you can not be spending more
than 42% of your total income on debt. That percentage can change
slightly from broker to broker. When I went for my second house. I
was higher than 42% on my current income, but with the rent I
would be receiving from the new rental property, and the rent I
would get from the house I already owned, this brought me down to
42% and I was able to prequalify for a loan.
When it is time to get a real mortgage, if you already own a house,
I would recommend trying to go though the same Mortgage
Company that you are currently sending payments, because you
have already established credit with them. Shop around for a good
rate, but remember rate is not everything.
Here is a little secret about mortgage companies, they don't really
care if you have bad credit. It is just an excuse to turn down a deal
that they don't like. All they want is to make a profit on your loan.
The biggest factors in getting a loan are the mortgage banks
appraised value of the house, and whether you can make the
payment. The reason for this is that you are giving them the house
as collateral. If you can't pay, they will sell it at a sheriff sale for
80% of its value. As long as you put 20% down on the house when
you buy it, and you can make the payment, then you will get a loan.
The exception to that is if the house is appraised at a lower value
then you have offered. In that case they will expect you to cover the
difference in the down payment. If you can't put 20% down when
you buy, you can still get a loan by purchasing PMI Insurance
(Privet Mortgage Insurance). You will have a small fee added to your
monthly payment. This insures up to 20% of the value of the house,
so the bank will not loose money in a foreclosure. In most cases you
will only need 5% down to qualify, this is still considered a to be a
conventional loan. There are also loans available that are insured
buy the Federal Housing Authority. This is called an FHA Mortgage,
and in most cases you will only need 3% down. Depending on the
area you are looking, FHA loans can be difficult to find because the
homeowner has to pass a special home inspection. Some towns may
already require a similar inspection, so in those locations you will
find that FHA mortgages are common. You can also purchase points,
or pay a higher interest rate to make the loan more favorable to the
Mortgage Company. Most mortgage companies sell your loan the
day after settlement for a profit. If they get you to buy the house at
8 ½ percent, and the going rate was 7 Percent, when they sell your
loan the next day they will make a 1½ percent profit in one day.
If you want to know what points are on a mortgage, a point is equal
to 1/8th a percent interest on a mortgage, or 1 Percent of the
purchase price of the house. All a point is, is a way for the Mortgage
Company to make a deal favorable to them. If they don't make
enough profit, you won't get the mortgage.
Getting a Mortgage