Finding a mortgage loan is one of the first steps in the home buying process. Unless a buyer is paying cash for their new home, they must find a lender willing to work with them by providing an affordable and reasonable loan. Many buyers have been through the process before and know how it works, but first-time buyers might not possess as much knowledge about the mortgage loan process, how it works, and what it means to find the best mortgage. It seems easy, but there are a few aspects of the process buyers should familiarize themselves with before accepting any mortgage loan offer issued by the first lender to respond. Let's review them now!
Determining A Realistic Number
One thing buyers must understand is how to determine a realistic number in terms of a mortgage loan. It’s exciting when a lender comes back with a number and tells a buyer they can afford to spend that amount on a home. The buyer may not have even known they could afford that much. For example, if a buyer gets a preapproval from a bank for 500,000 dollars but they didn’t believe they could afford more than 300,000 dollars, the number might not be realistic. The bank might say it's doable, but homeownership is expensive. If the buyer is only comfortable spending 300,000 dollars, that’s the true realistic number. Buyers must account for homeowner’s association fees, the cost of home maintenance, and their everyday living expenses when figuring what they can afford to spend. Even if the lender tells a buyer they can spend more, it doesn’t mean they should. Sit down, do the math, and figure out a realistic number and go from there when looking for the right mortgage.
Continue reading to discover the difference between a bank and a broker.