Realities of applying for mortgage today

With so much focus on high mortgage costs, it's worth doubling down on some of the finer points of applying for a home loan.

While the Federal Reserve's artificially high mortgage costs are stopping some homeowners from selling, there are more than a million buyers in the market today.

These tips are designed to help if you are applying for a mortgage. 

Credit score

Failing to check your credit score is a fundamental mistake. This score influences the rate lenders will give you. If you don't have a great score, remedy the issue before applying. Check out your score with TransUnion, Experian, Equifax and CreditKarma.com.

Buying programs

First-time buyers may find state-based programs to help them enter the market. Don't ignore this opportunity, as it could mean receiving thousands of dollars in assistance. 

Shop around

If you don't have time to check out each potential lender individually, use a mortgage broker to find the most suitable loan. They'll help you avoid buying the wrong mortgage. 

Ask about fees

Check all the fees associated with the loan. You can buy down your interest rate, but you should also check all the loan-related rules, including those that demand fees for early cancellation and accelerating repayments.

Pre-qualifying

A pre-approved loan does not guarantee you'll receive a loan or one at the interest rate you assumed you'd pay. Financial markets move quickly, and you'll be as exposed as everyone else to its risks. Always make your offer conditional on a loan approval.

Down payment

It's a myth that you must have 20% of the asking price to qualify for a loan. Many lenders, including Fannie Mae (3%), offer more attractive thresholds. However, if you're under the 20% threshold, your lender will demand you take out private mortgage insurance, which is a significant cost that affects the amount of money a lender will give you.

Instant loans

They don't exist for mortgages. A lender will want to value the property you wish to purchase to check you're not spending too much of their money. There's also a lot of documentation to be signed. Lenders take several weeks to come up with the money. Mortgages are not part of the “Immediate Gratification Economy”.