Helpful Tips on Financing

Preparation for Lender

Before meeting with a lender to apply for a mortgage, be prepared! You will need to provide lots of documentation. It’s a good idea to call your lender ahead of time to see what they will require.

Some of the basics are:

  • Verification of income – monthly and annual
  • Your current address and former addresses
  • Social Security card
  • Information on any outstanding debts
  • Place of employment and how long you have been there
  • Information on stocks, other property and assets
  • Previous 2 months bank statements
  • Copy of your sales contract

After your loan application, the lender will:

  • Verify all information
  • Check your credit history
  • Get an appraisal to determine the value of the property you are trying to buy
  • Order a title search
  • Obtain required insurance documentation
  • Review all to determine if your loan will be approved

Importance of the Mortgage Broker

The job of a mortgage broker is to help borrowers complete the application and secure loan rates. Because of low interest rates, mortgage brokers are in high demand either for funding a new home or refinancing an existing mortgage.

Tips for finding a qualified broker:

  • Ask for good references from friends or a trusted bank professional
  • If your state requires licensing of brokers, check with the licensing board
  • Check to see how many banks and other mortgage lenders the broker represents. More lenders will most likely get you the lowest interest rate. A quality broker usually represents at least 10 lenders.
  • Get an estimate upfront. Federal law requires mortgage brokers to provide a written estimate of their client’s total cost for their mortgage transaction 3 days after applying.
  • Ask about fees! Brokers receive a commission from lenders. You will typically pay for an application fee (should not be more than $300), and you might have to advance up to $750 for appraisals and reports. You should request an explanation of all costs.

Selecting the Right Loan

The loan needs to allow you to purchase the home you want while providing you with an affordable monthly payment.

Adjustable Rate Mortgage (ARM) usually has an initial rate substantially less than with a fixed-rate mortgage and is easier to obtain than a fixed rate mortgage. An ARM is best if you are planning to move within a few years.

A Fixed Rate Mortgage gives you the security of a set payment. This type of mortgage is best if you plan to stay in your home for more than a few years. This is especially desirable for those on a fixed budget.