Work sheet: How to get a mortgage

Home buying checklist

This step-by-step plan will help you make all the right decisions and find the right mortgage, with the best rate and terms. Everything you need, from deciding what type of loan you want right through to a successful closing, is here.

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How to get a mortgage

Step 1: Find a mortgage that's right for you.

•	The most common types are 30-year and 15-year fixed mortgages where the interest rate is fixed for the term of the loan. Other types include adjustable-rate mortgages, called ARMs, where the interest can vary over time, hybrid ARMs, jumbos, assumables and seller financing.

Step 2: Determine how much house you can afford.

	Considerations:
•	Equity in your current home (if you own).
•	Amount you can put down.
•	Monthly payments you can manage.
•	Real estate taxes.
•	Closing costs and insurance -- homeowners and possibly private mortgage insurance if you put less than 20 percent down.
•	Monthly payments on debt obligations including credit cards, alimony and student loans should not be more than 36 percent of your pretax income.

Step 3: Check your credit.

•	A potential lender will check your credit report immediately. Get all three of your credit reports to check for errors and clear up problems.

Step 4: Prequalification and preapproval.

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If you haven't found a home yet, consider getting prequalified, which means that a lender will review your financial history before you find a home, or preapproved, which means that a lender will check your credit and provide you with a letter stating that you've been preapproved for a certain amount. Both of these will help improve your purchasing power.

Step 6: Find a lender.

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Check the rates and lenders on Bankrate.com. Remember that just because a loan has the lowest rate doesn't mean it's the best one for you. In addition to the rate, check on points (prepaid mortgage interest which will increase your upfront costs), APR and other fees associated with a given loan. Compare mortgages and talk to several lenders before you apply for a loan.

Step 7: Assess your potential home.

•	Hopefully you've found your dream home by this time. Be sure to thoroughly evaluate the home to make sure it's what you really want. An appraisal is part of the mortgage process and will ensure that you're paying the appropriate price for your home.

Step 8: Prepare for closing.

•	Make sure the closing is scheduled before your loan commitment and any rate lock-in will expire. And be sure there is enough time to finish any loan documentation and complete any home inspections or repairs.

Step 10: Servicing the mortgage.

•	At closing, your mortgage lender must tell you who will be servicing your mortgage loan. Traditionally, the mortgage banker would service the loan for the life of the mortgage on behalf of the investor. However, the servicing may be handled by a third party.