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Basic Steps to Apply for a Mortgage
by Mark Keller
A mortgage is a long-term loan on a specific piece of property. Typical payments are made over periods of 15, 20, or 30 years. Banks, savings and loan associates, credit unions, and mortgage companies are the typical forms of home financing.

A mortgage is a long-term loan on a specific piece of property. Typical payments are made over periods of 15, 20, or 30 years. Banks, savings and loan associates, credit unions, and mortgage companies are the typical forms of home financing.

Applying for a mortgage involves three basic steps:
1. Complete the actual mortgage application. Next, a meeting between the lender and the borrower is scheduled. The borrower presents evidence of employment, income, ownership of assets, and amounts of existing debts. At this point, most lenders charge an application fee between $100 or $300.
2. The lender obtains a credit report and verifies other parts of the borrower's application and financial status.
3. The mortgage will now be approved or denied. The decision is based on the potential borrower's credit and financial history as well as an evaluation of the home (including its location, condition and value). Home buyers who are denied a mortgage may seek assistance under the Equal Credit Opportunity Act of the Fair Credit Reporting Act.

*Important Note The approval application usually locks in an interest rate for 30-60 days.

To qualify for a mortgage, you must meet criteria similar to those for other loans. The home you buy will serve as security (collateral for the mortgage). The major factors that affect the affordable of your mortgage are; your income, other debts, the current rates. Here are basic 5-Step Mortgage Qualifying Steps
1. Indicate your monthly income.
2. Multiply your gross income by .28 (or .36 if you have other debt).
3. Subtract the monthly debt payments and estimate monthly cost for property taxes and home owners insurance. You arrive at your affordable monthly mortgage payment(ammp).
4. Divide the ammp buy your mortgage term and rate. Multiply that by $1,000. This is the affordable mortgage amount(ama).
5. To obtain the affordabel home purchasing price, divide ama by the amount being financed.

A key to getting a lower rate on your mortgage is making a large down payment. A large down payment of 20% or more will make it easier to obtain a mortgage. You need to plan ahead and start aggressively saving money for a down payment. Personal savings, pension plan funds, sales of investments or other assets, and assistance from relatives are common sources of down payment money. Parents may help their children purchase a home by giving a cash gift or a loan, depositing money with the lender to reduce the interest rate on the loan, cosigning, or acting as comortgagors.

The private mortgage insurance is required if the down payment is less than 20 percent. The coverage protects the lender from financial loss due to default. PMI charges, which the borrower pays, vary depending on the amount of the down payment. These costs may be paid in full at the closing or are sometimes financed over the life of the mortgage, depending on the type of financing. It's important to note that after build up 20 to 30 percent equity in a home the buyer may cancel the private mortgage insurance.

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