There is a lot of debate about what is the best way to obtain a loan 1) a large national bank 2) a mortgage broker or 3) Local credit union. Therefore, know the mortgage process before you even start looking can greatly help you. If your scores are strong you can get better rates or maybe you need your credit cleaned up before you apply for a mortgage. The mortgage process can be complicated and frustrating but it can give you the opportunity of a life time it can make you a homeowner. Know where you stand in the process and and you will get the best mortgage product.
The first step is finding out your current credit score. This is the starting, and possibly ending, point of the entire process. You can easily find your score online there are many websites that give it to you for free like Credit Karma. A good score is anything 680 and higher. Many of the investment programs need a minimum middle score out of the three reporting agencies of at least 720. Anything less than a 640 would make it very difficult to do much of anything. Once you know your score, you know how strong of a borrower you may be. However, the score is just the first piece of the puzzle.
A credit report shows your monthly obligations that are used for qualifying purposes. Lenders will take the minimum monthly payments for these items and divide them by your gross annual income. All debts and your proposed mortgage payment are added and divide that by your gross income or the average gross income over a two year period if you are self-employed. What you get is your debt to income ratio which should be under 45%. If you are over 50%, you may have a tough time getting approved. If you are much lower you know you are working from a position of strength and should make the approval process easier.
Another important factor is your down payment. Did you know that your downpayment must be seasoned for 60 days. That means that the downpayment amount must have been in your bank account for 60 days.
Credit score, debt to income ratio and assets make up the mortgage approval process. Obviously, there is much more that goes into it, but this is your starting point. Between online credit scores, mortgage calculators and interest rate estimates, you should be able to have a very good idea of what you are qualified for before you pick up the phone and look for a mortgage. Who you decide to call is up to you but if you do a little legwork before you start you will be far ahead of the game.