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Familiarize yourself with the process. Most people don't buy a home every week. Needless to say, it can be somewhat complicated. That's why it's imperative to learn all you can about buying real estate and the mortgage process; know what's happening in your local market. The more knowledgeable you are, the harder it will be for anyone to pull the wool over your eyes, and the better deal you'll be able to get for yourself.
Get all the facts. While on the surface mortgages can look virtually identical, there may be large – or small and subtle – differences that can systematically remove thousands of extra dollars from your pocket. Know what kind of loan you're getting along with its conditions, and be aware of all costs that you'll incur (not only for closing but over the full life of the mortgage).
Work with a broker or lender that has more than one investor. If you're seeking a mortgage from your local bank, this tip probably won't do you much good. But if you're shopping and you want the greatest number of options, talk to a broker who works with numerous lenders. It's much more likely you'll be able to find just the program that fits your needs, especially if your credit is spotty.
Check your mortgage broker's track record. Industry professionals know that the most common reason that a real estate transaction falls through is because the financing – the mortgage – doesn't make it. When interviewing brokers, be sure to inquire about their closing performance numbers. Additionally, don't sign any forms guaranteeing them an origination fee; after all, why remove their incentive to work to get your loan closed?
Be a straight shooter. In other words, don't hide anything from your lender. Many people have endured financial hardships at one time or another, and as a result have less-than-perfect credit files. If you fall into this category, take heart; you're far from alone. Although your situation be embarrassing to talk about, your lender really will try to help if at all possible. But that can only be done if you give him or her a chance to do so. Hidden facts will likely come out later anyway; and you don't want them surfacing halfway through the process or at closing, when it's much too late to rectify.
Don't make any large credit purchases prior to applying for your mortgage. Your total debt is a key determinant in the loan qualification process, and your total monthly payments must be below a certain percentage of your gross monthly income. Therefore, don't take on any additional debt until after you've purchased your home (and then only if you can still afford it).
Know your own financial situation. Finally, it's critically important for you to be acutely aware of how you stand financially and as well as credit-wise. That means reviewing your credit report. If it's bad, take steps to improve or correct it. If your credit cards are maxed out, pay them down to 30% or below their limits, and keep them there. And keep all of your monthly payments current. Even one late payment can have a significant effect on your credit score, and consequently the interest rate you'll pay on your new mortgage. Be proactive; make sure that you'll have what you need before you seek out a lender. It'll make your home-buying experience much smoother, and possibly less expensive as well.
