3. Shopping for a Mortgage

Shopping

How it Works the Military Consumer Justice Project Way...

We use a simple road map to get you to the right home and mortgage. So, are you ready to get going? (Here, we’re going to assume you want a new home and mortgage. Later, we’ll give you a road map for other scenarios.)

1. When you get in the home-buying mood, slow down! Would it bother you if you threw away $50,000? You can do that on a $200,000 mortgage if you rush. That’s why before you begin looking for a new home or a new mortgage, we ask you to do your homework.

2. What house best fits your needs and "wants"? How much house can you afford? How much mortgage can you really afford? Doing your homework starts by answering these questions. The Military Consumer Justice Project Home Buying Guide shows you how.

The section How Much Home Can You Afford provides worksheets and mortgage calculators to give you a rough idea of the range of mortgages that you can afford. You will want to have these estimates in mind as you begin to search for potential mortgage lenders.

3. What is your credit score? Is your credit report correct and in good order? Before shopping for a mortgage, wise homebuyers make sure that they have reviewed their credit report for accuracy and that they know their credit score. Your credit report profiles the history of how you have used credit over the past seven years. Your credit score (often called a FICO score for the Fair Isaac Company that originally developed the rating) is a three digit number based on a number of credit factors in your credit report; your credit score gives potential lenders a quick snapshot of your creditworthiness. These two Military Consumer Justice Project Reports from Remar can help you review your credit:

    • How to Review Your Credit Report
    • Tips for Improving Your Credit Score

4. What mortgage loan options are available? Mortgage lending has a lingo all its own. And the many types of mortgages can become confusing. Chapter 4 "Loan Lingo" and Chapter 5 "The Many Flavors of Loans" give you an overview of these important details. What type of mortgage repayment plan is best for your budget and family plans? These chapters help you answer that question before you begin to shop for an appropriate mortgage lender.

5. Finding the right mortgage lender. With interest rates at historic lows and the housing market boom forcing up home prices in many cities, the mortgage lending business has never been more competitive or more "creative" as lenders try to find ways to "get people into homes." Every time you open the mail or turn on the TV there's an offer for a "Pre-approval." A genuine "pre-approval" (not "pre-qualified," a term that means nothing) can be an important step for a smart homebuyer, but not if it's with the wrong lender or for a mortgage that's wrong for you. Chapter 6 show you how to find a mortgage company that fits your needs.

6. We preview the closing process. Going to the moon in a homemade rocket is easier than understanding all the complexities and expenses involved with the closing process on a loan. That complexity can cost you money if you’re not careful. Our goal here is to make sure you understand each part of the loan-closing process, including the costs associated with “outside” fees, etc