For many buyers, applying for the mortgage loan is one of the more stressful aspects of buying a home. The loan application need not be a stressful time. By following a few easy steps, you'll sail through the loan application process.
Talk to your broker about your short term and long term plans to find a loan program right for you. With so many financing programs out there, be sure to understand what will benefit your financial plans. Clarity about your current and future financial plans will best help your broker to advise you wisely.
Make a list of any questions you have about the loan program. Be sure you understand the advantages and disadvantages of the various mortgage programs for which you may qualify, including the advantages and disadvantages of Fixed Rate Mortgages versus Adjustable Rate Mortgages.
Decide if you want to lock-in or float the loan's interest rate. Locking-in the rate means that the lender commits to the mortgage interest rate for the loan - typically at the time the loan application is submitted. There are certain extents of time you can lock these rates at no additional costs.By floating the rate, you can lock-in the interest rate anytime between the loan application day and closing. Buyers opt to "float the loan" when they believe interest rates will drop after their loan application date and prior to closing. The risk is that rather than dropping, interest rates may rise, increasing the mortgage payment. If interest rates are steady, you can usually get a better interest rate by locking the rate as close to the closing date as possible, but lenders require more specific documentation by these dates. The tricky part is that rates are always changing and that each lender has their own specific guidelines including timing. Talk to your mortgage broker to help you with this.
Decide if you want to pay additional points to lower your interest rate. Typically you can elect to pay additional points (each point is 1 percent of the mortgage loan payable in cash at closing) to lower the interest rate of your mortgage loan.
Gather your paperwork. The quicker you can get the required documents for the mortgage broker, the quicker you can be ready to ge the best rate when it is available. Prompt delivery of the requested documents to your mortgage broker are crucial for manyreasons, especially in a market where interest rates are changing. Procrastination can cost you money.
