The Mortgage Process

The Mortgage Process

Interview Lenders

Once you have thought through the above, it’s time to talk to a lender or mortgage broker about getting “pre-approved.” A lender is just a bank, and most banks—including community banks—offer home mortgages. A mortgage broker has access to several institutions to fund mortgages, so they may have access to more financial products. 

You may want to shop around with different lenders and brokers, looking at rates and products offered. Some specialize in certain areas, or certain types of buyers. The traditional 30-year fixed mortgage is a good option for many, but especially in today’s economic climate, you may want to consider less traditional vehicles like ARMs, which may offer lower rates. If you know you’ll only live in a home for 5-6 years, for example, a 10/1 ARM isn’t particularly risky, since you’ll likely be gone before the rate changes. Plus, even if you plan to stay somewhere for 10 years, you’ll save a lot of money by taking advantage of low rates now, and there are limits to how much the mortgage can increase after the 10 years are up.

If you are eligible for an FHA (low to moderate income, first-time buyers, seniors, etc.) or VA Loan (veterans), explore those as well. They often come with more favorable terms and may make a home purchase in reach for those who haven’t already accumulated a lot of capital.

Keep in mind there may also be some special offerings or options available to you as a first-time home buyer (e.g. you may be able to borrow from retirement without penalty). Ask your lender or broker about these options as well.

Get Pre-Approved

This means: Getting a letter from the lender or broker saying they will secure a loan of a certain amount. Many lenders will give you pre-approval during the search process, but they will write a specific letter for a specific amount when you have an actual home you want to make an offer on. Make sure you talk through this process with them ahead of time, especially if you live in a place where the real estate market is competitive. You may need them to move quickly.