How to obtain a mortgage in today's housing market

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By Danny Thornton
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obtain a mortgage in today's housing market

I have read many articles on this subject and I would like to dispel some of the negative news that is out there.

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

knowledge

Step 1

The first step that you need to do in today's market is arm yourself with knowledge. The best knowledge is to know what the mortgage companies are going to want to know. In most mortgage companies want to know about your residential history, your credit history, and your employment history. They are looking for the last 2 years. First, lets break these three down.
1. Residential History - They are trying to determine how good you are paying for your current place now. Just because you live at home rent free with parents does not exclude you from qualifying. Also, they are looking for stability, but it is not always required.
2. Credit History - mortgage companies want to know that you can manage what you currently have to pay. Lack of paying any bill on time shows a neglect to pay. This can hinder you from acquiring the amount of finance that you need or at least the Loan to Value amount. This means how much they will loan versus how much the property is worth.
3. Employment History - This is where your income is based on. This tells us how much you can afford. We will average your income over the last 2 years unless you have changed jobs in that time. If you have, this will not get you from getting a mortgage.
Step 2

Now that you know what they are looking for, it is time to arm yourself with the knowledge that they will acquire from you before they get it. You can go on line and get a copy of your credit report. There are companies out there that will help monitor your report daily, weekly, and monthly. I highly recommend this when you are trying to buy a house. And even after because it will allow for you to improve your scores over time.

Once you have your credit report in hand it is time to look at collections, judgments, liens, bankruptcy, foreclosures, and any past due bills. If you have none, then move to the next step. If you have some, then it is best to note beside them the circumstances that caused this hiccup. Lenders are not looking to not loan money. They are looking for the reasons to give it to you and explaining why you had the issues in the past is helpful to them. Just because you have these issues there does not mean that you can not qualify for a loan.
Step 3

The next thing that you want to do is find an ethical lender that you can trust. The last thing you want to do is buy a home that you really can not afford. Also, just because you can not make the down payment should not be the reason you do not get into a house. If you have at least 2 months worth of PITI (principle, interest, taxes, and insurance payment) in your account, there are still companies out there that can get you financed. There is Down Payment Assistance programs that qualified lenders can use. The maximum loan to value in today's market is 97% financed.
Step 4

Once you selected the company that you want to use (by the way, shopping rates in today's market is not the smartest thing. With the volatility of today's unstable market, rates fluctuate at least once a day, sometimes more. And just because you hear that the Fed's cut the rate, don't jump and call your broker. The rate cut was what the Fed's loan money to the bank at to loan money to you.), it is time to apply for the loan. You should be able to provide all the information that the mortgage person wants. If your mortgage person is good, they will have you an answer in an hour up to four hours. If they need a manual undrewrite, then it will take a little longer.

Also tell your mortgage person that you want a pre-approval not a pre-qual.
Step 5

Now, it is time to take that next step. Finding an ethical Realtor that will work for you. Most the time, your lender has developed relationships with Realtors and can refer one to you. Either way, it is time to go shopping armed with the most important piece of paper in hand: A Pre-Approval Letter.