How to Get The Right Mortgage

Whether you're financing your first home or your third investment property, it's important to obtain the right mortgage for your situation. Here is an easy-to-follow guide that will help you navigate the mortgage lending waters and stay afloat while getting the right mortgage for your needs!

Instructions

Difficulty: Easy

Things You’ll Need:

• An idea of how long you'll be owning the property you're buying
• Knowledge of your current financial situation
• Knowledge of your credit score

1. Examine your personal financial situation. It is important to know how much you can afford to spend on your housing payment each month. In the case of an investment property, you need to plan for vacant periods. You should be able to make the payment on your income property in addition to your regular monthly obligations.
2. Know your credit score. The most favorable mortgage rates are generally awarded to consumers with a credit score above 680. If your score falls below 680, it is possible you will fall into the sub-prime market. You can still obtain a mortgage, but it will likely be at a higher rate.
3. After you've determined your financial capabilities and your credit score, it's best to start interviewing potential lenders. You may want to consider speaking with a mortgage broker. Mortgage brokers generally have access to more products than a mortgage agent who works for a specific lender.
4. Explain to your prospective lender the following things:
   
   * How long you plan to stay in the home you're purchasing if it is a primary residence
   * If you're purchasing a primary residence or an investment property
   * How much money you're willing to contribute as a down payment
   * Whether you're more comfortable making a full payment each month (including principal & interest) or a smaller interest-only payment
5. Once you've provided your prospective lender with this information, they will make mortgage product recommendations to you. Be sure that you understand the options presented to you and don't be afraid to ask questions!
6. Decide on the right mortgage product that you feel meets your needs and proceed with the application process.

Tips & Warnings

• If you're only going to live in your home for 3 to 7 years, you may want to consider an ARM (adjustable rate mortgage). The rates are generally lower and there's sometimes no reason to pay the higher rate for a 30-year standard mortgage.
• Be wary of mortgage products with "teaser interest rates" that are extremely low for a short time frame and then increase dramatically.
• Be sure to ask if the mortgage an agent is recommending to you has "negative amortization." This means that the payment you make each month isn't enough to cover even the interest amount, and you can end up owing more on your house than you even paid for it!
• Don't begin the application process until you've decided on a lender.
• Err on the side of caution when it comes to your monthly payment capabilities. When's the last time you complained about having too much money in the bank?