Going about the mortgage process properly can save you thousands of dollars. Take time to understand the system and make educated decisions. Whether it’s a purchase or a refinance real estate loan, the process involves following a fairly strict timeline. It can be either a smooth or a bumpy road and usually

depends on your level of preparedness. Before navigating through the home loan process, start by learning the road map.

Find out how much you can borrow. A loan prequalification or pre-approval is critical to the loan process and allows a consumer to receive an estimate of their borrowing power. Don't skip this step. Getting pre-approved is fast, easy and free. A written pre-approval includes a completed credit application and a certificate guaranteeing you a mortgage to a specified amount. With one in your pocket, you won't waste time looking at homes you can't afford. Instead, you can invest your time shopping for the home of your dreams - and in your price range.   Examine your finances. How much can you afford to spend? While a lender will tell you how much you qualify for, it's up to you to figure how big a payment fits into your budget. What monthly dollar amount do you feel comfortable committing to? Remember to consider related costs such as insurance and taxes, as well as interest and principle.   Consider what type of real estate loan is best for you. Choose the most comfortable loan for your real estate needs. In consultation with your home loan advisor, educate yourself on which loan product and program best fits your home financing needs and home ownership goals.  Compare fixed-rate with adjustable rate mortgages. Look down the road. Where will you be in 15 years, 30 years? What obligations might you have? Take those things into consideration as you choose a loan.   Check your Credit Report. A lender will run a credit report on you (it only takes a few minutes), but you'll be ahead of the game if you acquire a copy first. You'll know exactly what's on it and be able to correct any inaccuracies. Clear up any financial problems. Do you have credit problems or owe money to the IRS? Buying a new home may still be a possibility. Contact a financial advisor or tax resolution service to find solutions.   Shop Around. When you're ready to get a real estate loan, explore your options. You can choose either a direct lender or a mortgage broker. A direct lender has money to lend and makes the final decision on your loan. Brokers are intermediaries who choose from many lenders. A broker may be able to help find you a loan if you have special financing needs, but he or she will also receive a percentage of what you borrow.   While you're shopping for a real estate loan, also look for the best loan costs. These may include: • Interest rates • Broker fees • Points (each point is one percent of the amount you borrow) • Prepayment penalties • Loan term application fees • Credit report fees • Appraisal costs • Be aware. Don't let hidden costs sneak up on you. Ask your lender for a written estimate.   Apply for a real estate loan. Gather all the documents you'll need to verify your loan application. Lenders will want to know your job tenure, employment stability, income, assets (property, cars, bank accounts and investments) and your liabilities (auto loans, mortgages, installment loans, credit-card debt, household expenses and others). You'll need to provide documents such as paycheck stubs, bank account statements and tax returns. Check with your lender or broker for more information. Your attention to detail is needed here to ensure that all information reflected on the application is accurate and that all supporting documentation is gathered and submitted with the completed loan application.   The loan processing phase covers all the steps the lender takes once they have your completed paperwork: ·   Application review and verification ·   Appraisal of the home’s value ·   Underwriting – involves analyzing your application to make sure you can afford the loan ·   Clearing conditions of the real estate loan, assuming the loan process has produced an approval   Lock it down. With interest rates changing daily, locking down your rate can prove a big money saver. A rate lock - in writing - guarantees you a certain rate and terms for a specified period of time. Lock in all the costs you can, including interest rates and points. And try to set the lock at the time of application, not at approval. This will protect you from rising rates. Your lock-in period should be long enough to allow for all processing time. Most lock periods range from 15 to 60 days. Make sure to check with your lender or broker about the average time it takes them to process a loan.   Ask about Pre-payment. You can shave years off the length of your home mortgage by restructuring the way you pay back your loan. Simply paying more frequently can save thousands in interest. So can making a lump payment toward the principle - or paying a little more each month. These methods are called pre-payment. Not all loans allow for pre-payment. If you want the option, discuss it with your lender or broker.   Closing, or settlement, of the real estate loan process. This can be done in person or using a 3rd party escrow service, depending on local loan process customs. If everything proceeds according to agreement, you’ll be signing lots of papers, exchanging lots of money and walking away as the new owner of your home!   Montana Housing Resources - Montana Home Buying Assistance   Explanation of "Mortgage Types      Explanation of Points   First-Time Buyer      Free Reports     Appraisal Information   The Advantage of Mortgage Insurance     Glossary of Credit Terms   Get a Home Inspection     Montana Tax Information    Montana Real Estate Tax