Consider your lending options

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This article was originally published in The Galveston County Daily News on 2/23 as part of my weekly 2019 column.

You may already know what a mortgage is and are wondering how to obtain one. A mortgage is another way of saying a home loan. Mortgages can serve different purposes. You may get one to purchase a home or to refinance an existing loan. You can also get a second mortgage to tap into the equity of the home. Basic knowledge of mortgages can help you find a loan more suited to your needs and frequently lower interest rates.

I know you research best televisions and dishwashers, so why not learn as much as you can about the lending process? It is especially good to have done this before speaking with a lender, and before you really start looking with your Galveston Realtor.

Ideally, before you do anything else, you see if you can even get a loan for a house. You may start this online at many sites to get a ballpark estimate as to your ability to borrow, and then you can approach your Galveston Association of Realtors affiliate lenders for a more accurate pre-qualification or pre-approval. Or, you can just start at the lender.

Not everyone will qualify for a mortgage. It makes things simpler if you have a decent idea as to your credit score, your debt to income ratio, and ensure you have enough money for downpayment, closing costs, and any prepaid expenses required by the lender such as insurance. Then, talk to your chosen lender and be ready for a pre-qualification before you really start shopping for a new home. I generally prefer local mortgage brokers as they know of various programs for homebuyers in the area—there can be programs for teachers, first responders, first-time homebuyer assistance programs, and other opportunities. Using a mortgage broker means you have a real person monitoring your loan file rather than a giant faceless organization. Brokers only get paid for making loans. That makes them more motivated to get your loan approved and to make you happy with the terms.

With your pre-approval in hand, start looking for that new home. When you have found it and have it under contract, the lender will pull your credit and ask you to provide documentation of income. From this point onwards, it can take as little as a week or a month or more to approve your loan. At this point you will be given a conditional approval with a list of additional items you must provide before the actual loan documents are provided and you are able to purchase the property.