Getting a Mortgage Step by Step

Purchasing a new home can be such a stressful and rewarding experience all wrapped into one. Finding a mortgage is a huge step in understanding how much a bank is willing to provide a loan for your home and helps home buyers understand their limit of how much home to own.

The first step to acquiring a mortgage is to check your credit score. You want to fix any mistakes or errors located on your credit report prior to pre-qualifying or qualifying for a loan. You can contact the three credit bureaus directly to acquire a copy of your credit report. You can often locate information online that includes your FICO score in addition to all three credit reports. This is what you want. Your FICO score is what a bank utilizes to gauge how worthy you are credit wise to pay back your loan. If your score is low, below 600, they will likely not provide a loan for you unless you have a large down payment for the house.

Once you have received your credit reports, check for errors and go about making any changes to your report. You can often call the agencies themselves or they have online forms for you to fill out. This process doesn't generally take very long to update, once errors have been found. They can be removed fairly quickly.

Make sure you have all of your paperwork in order - pay stubs, tax returns for the past two years, or longer if you are self employed, bank statements, etc.

If your credit score is low, and you do not have a large down payment for your home, you will want to establish some credit to increase your FICO score. You can do this by opening up a credit card, or even a secured card, that reports to a credit bureau. Not all secured cards do, so you will want to find a bank that does. Check bankrate.com to locate banks that do report. Public Savings Bank has a secured card that does as well as others.

The next step to getting a mortgage is talking to lenders. Many lenders will look at your income and credit score to give you a pre-qualification amount. This is the amount you can look at and assess how much house you can afford and start looking around. You cannot purchase a home with just a pre-qualification letter. These are generally only good for a specific period of time and great for assessing home values where you want to live and determining how much home you can afford. If you are looking to get into a home soon, you will want to start the process of qualification.

Qualification is the next step and is pretty heavily consumed with paperwork. You can shop around for a mortgage based on interest rates and terms, which is smart since you will want to weigh the different options as well as loans available to you. Once you are qualified, you can start house hunting, putting in offers, and getting the house that fits your dreams.

Happy house hunting.