5 Important Steps to a Good Mortgage

A mortgage is a long-term decision that can have far-reaching implications and a significant impact on your life. For this reason, it is not a decision or purchase that should be made lightly, quickly, or without serious thought and research into the process and what every aspect of the mortgage loan is going to mean for you. Understanding your personal financial situation and what key indicators that a lender is going to be looking at when deciding whether or not to offer you a loan is important before you even fill out your first loan application. Here are five steps to keep in mind to help ensure that you are prepared to receive the best loan offers available:

1. Have a stellar down payment: At one point in mortgage history, a down payment was 20% standard. If you didn't have it, you couldn't get a mortgage loan, it was as simple as that. In recent decades lenders began to make exceptions to this rule and began offering mortgages to those who had down payments of maybe 15%, then maybe 10% and 5% and finally, even loans with zero down became much more common due to creative financing that was conceived of by different lenders and banks. With the turn in the housing market that began in 2007-2008, many banks have pulled away from such creative financing options and are now returning to their staid and solid roots of demanding 20% down. Plenty of lenders still offer loans for less than 20% down but the terms of these loans have become very unfavorable. In order to have the best option for home loans, you should try to get as close to 20% (or greater) as you can for your down payment when shopping mortgage loans.
2. Fix up your credit score: The very first thing that will be looked at when you submit an application for a home loan is your credit score. This number is a representation of your credit worthiness and credit history over the last seven years or so that, at first glance, can tell a lender a lot about how you have handled your past and current credit obligations. The higher your credit score the better, and you can take steps to improve it before you apply for a loan by following some simple steps such as paying down your credit card balances in order to increase your total available credit, staying current on all of your bill payments in the year and months before you apply and paying off or settling any debt collections accounts that you have currently in action against you.
3. Close in on your closing costs: While most people realize and remember that they are going to have to come up with and pay for their down payment, surprisingly few people think about the other cash expense that comes when buying a home - the closing costs. Closing costs will vary depending on your escrow company, the size, nature and complexity of your loan and your lender's requirements, but this amount should be prepared for and paid for with cash if at all possible. Just knowing that you have that money (and verifying it in their underwriting), will impress a lender even further when they are considering giving you a mortgage loan.
4. Get multiple quotes: Don't settle for a single offer from a single lender. Multiple quotes will not harm your credit score as long as they fall within a 14 day period so there is no reason not to get as many different quotes as you feel you need to either find a baseline average for choosing the best rate, or for finding and selecting the lender that offers you the best loan repayment terms.
5. Consider more than the monthly payment: When you are looking at mortgage offers and comparing them you should consider more than just how much the monthly mortgage payment is going to be in making your decision. The interest rate, length of the loan and other terms such as whether or not there is any early prepayment penalty are important considerations as well, each of which can mean thousands of dollars in savings for you or extra cost if you're not careful.