If you are in the market for a new home, before you call your real estate agent to begin the home search process you want to be preapproved for a mortgage loan.
It is a good idea to apply mortgage online, which is easy, convenient, and will also save you time, and money.
Most real estate agents will want to know right up front if you are preapproved for a mortgage loan. If you are not preapproved, a good real estate agent will advise you to start that process immediately. Perhaps you have already been advised by a Realtor to find a good mortgage company.
As a former Realtor, I can tell you that I would not begin to send properties to clients, or show them homes until I knew that they were preapproved and ready to go, and for what amount were they preapproved for. This not only benefits the real estate agent, but it also benefits you, the buyer.
There is nothing more frustrating than finding a home that you love, and want to buy, only to find out later that you can’t qualify for it. Not to mention the wasted time, and the lost opportunities of homes that you would qualify for.
Of course the Realtor does not want to waste his or her time and money showing properties to clients that can’t get preapproved, or that won’t be preapproved for a high enough amount.
He or she also does not want to lose the chance to work with a buyer that is preapproved by spending time showing homes to someone that is not, and may not be able to be preapproved.
I will explain to you what the lenders or mortgage companies look for in order to preapprove you. I will explain the different types of mortgage loans.
I will also tell you why it is smart to find a mortgage company or lender online, and the best way to search for your mortgage company or lender online.
What Mortgage Companies or Lenders Want to See
Have you ever wondered what mortgage companies or lenders look at, and want to see in order to preapprove someone for mortgage loans?
There are certain things that these folks want to see from you the borrower in order to feel reasonably assured that you will be able to pay your mortgage on time every month.
1. Credit Score
Mortgage companies and lenders want to see a credit score of at least 620. They look at your credit score from the 3 main credit reporting bureaus, Trans Union, Experian, and Equifax. They take the middle score from these 3 credit reporting agencies.
For instance if your scores are 600 from Trans Union, 700 from Equifax, and 650 from Experian, they will use the middle score of 650 from Experian to count as your credit score.
Obviously, the higher your credit score, the better. As you go higher you will qualify for the best loans with the best terms, and the lowest fees, assuming of course, that the rest of your application checks out.
2. Time on Job/Income
Lenders and mortgage companies want to see at least 2 years of continuous work experience, and ideally on the same job. And, of course, you need to be employed currently.
You can have more than 1 job, but it needs to be in the same industry, and there can’t be large gaps between jobs.
They also obviously look at how much money you make, and how you make it. A salaried job is given some preference over a variable income such as a commission, or hourly job.
If you are self employed you have to be in business for at least 2 consecutive years. Your proof will be your tax returns.
Lenders and Mortgage companies look at certain debt you have called mandatory debt. This is the amount of money you may owe for monthly credit card payments, monthly car loan payments, lines of credit, child support, alimony, other mortgages, and property taxes as a percentage of how much money you make.
It is acceptable to have no or little debt, but often times having no debt can hurt your credit score.
4. Down Payment
The more down payment that you can put toward your home mortgage, the better. This lessens the amount you will be borrowing, and will make it easier for you to pay the loan back.
You will have to show some proof of this down payment amount whether it be a bank statement, a gift letter, or proof of sale of an asset like a home, car, boat, etc. in an amount large enough to cover the down payment.
5. The Home or Property
Although the home or property that you want to buy is normally not known when the preapproval process is started, it will become a factor before the bank actually fully approves the loan.
The mortgage company or lender will want to be sure that the property you want to buy is worth what you are paying for it. They will normally order an appraisal to be absolutely certain.
If your home choice does not ‘appraise out’ according to the lender’s appraisal, the loan may not be granted.
Types of Mortgage Loans
Fixed Rate Mortgage: A fixed rate mortgage loan is by far the most common loan that is provided by lenders nationwide.
A fixed rate loan keeps the same interest rate throughout the loan. This means your monthly payments are steady and consistent.
The 30 Year is the most popular fixed rate mortgage loan. Loan durations of 15 year, 20 year, 40 year, and even 50 year fixed rate loans are also available with some lenders.
An ARM or Adjustable Rate Mortgage, has floating or changing rate of interest. An ARM, can fluctuate, unlike a fixed rate mortgage depending on various economic factors. The ARM is considered more risky than most other loans.
Two-step Mortgages: A two step mortgage loan will have the initial period of time at a fixed interest rate percentage, and the second period of time at a different fixed interest rate percentage.
Such as, the initial 10 year term of the loan could have a fixed interest rate at 5%, and the next 10 year term could have a fixed interest rate at 6%.
Combination Mortgages: These are mortgages that combine a fixed interest rate loan for a certain time period, and an ARM loan or another time period.
The interest rates, and time periods can very depending on the particular lender.
Balloon Mortgage: A balloon mortgage usually has a fixed interest rate for a certain time period, normally with low monthly payments, and a balance, commonly a considerable amount or balloon amount due at the end of a certain loan period.
Finding Your Lender or Mortgage Company Online
It makes a lot of sense to shop for a mortgage online. Ten or fifteen years ago, it may not have been advisable to shop for a mortgage online.
Today, however, almost anything and everything imaginable can be and is purchased online every day of the week.
All of the top companies in the world do business online, and the assurances and safeguards are in place.
It is easy to do your due dligence on any company easily through Google, and many other websites.
By shopping for a mortgage online, you can cover a great deal more ground much more quickly than if you set appointments, and physically drive to banks, mortgage companies, and other lenders in person.
You may have seen the television ad where the Muppet character tells his human friend that instead of putting on a suit and going to the bank, you can apply online with a few clicks, and the banks come running to me.
This is true. You can find information about loans such as interest rates, and fees, and apply to several of these lenders at one time.
This increases your chances of being approved. They will let you know very quickly in most cases, if you are preapproved or not.
You never have to leave the comfort of your own home, or office. You will save a considerable amount of time both while applying, and waiting to hear if you are approved, you won’t have to fight traffic, and even save a few dollars in the process.
The Best Way to Find Your Mortgage Online
The best way to find your mortgage online is to find a website that provides you the opportunity to fill out your information one time, and in so doing submitting to at least 4 or 5 different lenders at once.
You will need to know the type of loan you want, most people go for the fixed rate loan, and how long of a loan duration you would like, most people like the 30 year loan.
You also want to hear back as quickly as possible what you may qualify for, and from what company. In many cases, you can hear back within minutes.
At this point, it is a decision that you will need to make as to which mortgage company you want to go with.
This is when you will need to weigh loan offers based on reputation of the mortgage company, duration of loan, interest rate, fees, and points.
The online source that I recommend is Lending Tree. They will provide you multiple, reputable offers at the same time.
They also provide a handy mortgage calculator to calculate what your payment will be, so you will know what you can afford. Click on the picture below.
Applying for a Mortgage Online is Fast and Easy
It’s a good idea to apply for a mortgage online. It is fast, convenient, easy, and can save you time and money.
Most real estate agents won’t show homes to clients that aren’t preapproved for a home loan. You want to be preapproved so you know how much home you qualify for. This will keep you from being disappointed, and wasting your time.
Lenders want to see a minimum credit score of 620 in most cases. The 3 main credit bureaus are Trans Union, Equifax, and Experian.
Lenders take the middle score to arrive at your credit worthiness number. They also want to see that you have a minimum of 2 consecutive years on the job. Salaried jobs are preferred over hourly, self employed, and commission type jobs.
Having debt is acceptable, but too much debt in relation to how much you make can be problematic.
The more down payment you can put toward your home the better from a lender’s perspective.
You want to pick a home that is worth what you are offering to buy it for, or the bank may nix the deal with their appraisal.
The most common type of loan is the fixed rate loan. The most common fixed rate loan duration is for 30 years.
Other types of loans are the ARM, adjustable rate mortgage, the two step mortgage, the combination loan, and the balloon mortgage.
Almost anything you can imagine is purchased online today. A home loan/mortgage is no exception. Make sure you choose a reputable lender.
Applying online is a breeze compared to the old way of dressing up and going from bank to bank or lender to lender to apply for a home loan.