To obtain a mortgage, consider the following steps, each of which are discussed in other sections of this article:

Step 1. Prepare by creating your financial picture and explanations for any financial missteps. Past problems do not automatically foreclose you from getting a loan.For more information, click here.

Step 2. Find an ethical lender. If you are not up to the task yourself, you can engage a mortgage broker. In fact, to assure you get the best terms, you can use a broker while also looking for a loan on your own. Do not assume that the lowest advertised mortgage rate is the best deal. Expenses banks charge vary and these charges can affect cost greatly. Bottom Line Personal suggests asking: "What's your 30-year-fixed rate with zero points if I lock it in for 60 days?"  Even if that is not the precise loan you are looking for, this kind of precise question helps you compare apples to apples.  For information about choosing a mortgage broker, click here. 

Step 3. Once you find an interesting situation, check all details before agreeing. For instance, in addition to checking the interest rate, also look at the Annual Percentage Rate (APR) which is the effective rate you pay when all costs are considered.  For details to consider, click here.

NOTE:

• You cannot be discriminated against when requesting a mortgage because of your health condition thanks to a federal law known as The Equal Credit Opportunity Act .
• Do not take out another loan while closing on your mortgage.  The loan approval process does not end until the closing. A lender may back away from the loan if it learns you changed jobs or took out an additional loan such as a car loan.

Step 1. Get an idea of rates and fees. You can do this without providing any personal information at www.MortgageMarvel.com which works with over 200 participating lenders. You will be asked for such information as the property's purchase price, zip code, loan amount you are looking for and your FICO Credit Score. (The more advertised LendingTree gives your information to lenders who may contact you with annoying sales pitches.)

Step 2. Get a fix on your situation and to start pulling together the documentation that will be required by a lender. The more aware you are of your situation from a lender's point of view, the better you will be able to save time finding a lender and negotiating a loan.

The major areas lenders look at are:

• Your residential history: where you live and have lived, as well as how long you have lived in each location. The longer you lived at each location the better. Lenders will also look at your history of the timeliness of your mortgage or rent payments.
• Your credit history and current credit store. The better your credit the more likely to get a loan, and at a reasonable rate. To learn how to obtain your credit report, see: Credit
• Income, including employment history, dividends and interest. Lenders will review the source of your income to determine your ability to repay the money they lend you. Lenders will also consider the length of time you spent at each job (looking for stability) and the amount of your income.
• Your ongoing expenses. Again the question is whether you can afford to repay the loan while paying your other expenses. In addition to your living expenses, lenders will want to know about other expenses such as alimony and/or child support.
• Your other assets. The question is whether you have other assets with which to pay off the loan if you can't from your income.

To get a fix on your income and expenses, we provide a Cash Flow chart (income/expense) and Net Worth Chart that you can print or complete and store on line.

Be prepared to explain what happened if  you missed payments, went through a foreclosure, or went bankrupt. Lenders look for reasonable reasons to help them trust you with their money.

Once you have your financial picture in order, look for an ethical lender. Thanks to the internet, you can do that on line as well as by contacting local banks and savings and loan associations. You can also use a mortgage broker who may be able to find you a better deal than you can find on your own. If family, friends or colleagues don't have a mortgage broker to recommend, you can contact your local Board of Realtors to help you find one.

When deciding whether to work with any particular mortgage broker, consider asking the following questions:

• How many different banks and other financial institutions do you work with?
• What types of banks or financial institutions are they?
• How are you compensated and who pays you, the lender or me?
• What are the different loan programs which are currently available?
• (After giving a thumb nail sketch of your financial situation): Do you think you have lenders who will consider giving me a loan? If so, on what terms including down payment, rate of interest, points, and term?

Before agreeing to a mortgage, consider all of the details - including the fine print. You don't want to be surprised in the future, especially at times when you can least afford them.

For instance, consider:

• The interest rate (how much you pay for a loan of the money).
• Annual Percentage Rate (APR) - the annual rate you pay. This rate includes the interest and other lender fees divided by the term of the loan.
• If your rate if adjustable:
  • On what basis does the rate adjust?
  • How often can it adjust?
  • What is the maximum adjustment allowed with each adjustment?
  • What is the maximum cap for all adjustments?
  • What fees and other costs to you have to pay, including but not limited to:
    • Origination fees
    • Points
    • Appraisal costs
    • Credit report
    • Title Insurance
    • Inspection reports
    • Recording fees
    • Taxes

Also ask:

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  • Will the lender guarantee the estimate for these fees (referred to in the industry as Good Faith Estimate (GFE). If the lender doesn't guarantee the GFE, you don't really know what costs will be when you are ready to close on the loan.
  • Will the lender agree to lock in the rate and other terms? If so, for how long a period of time? (This is to assure that if rates fluctuate, you will receive the rate you were quoted).
  • Is there a pre-payment penalty? If so, in what amount?
  • What could possibly hold up the loan?
  • How long does it take after my application is finally approved until you write the check?
  • Will anyone be paid a fee with respect to my loan? (If so, you can try to negotiate the fee lower. All costs will be reflected in the loan terms - in other words, you'll pay one way or the other).

Fine points to look at include what happens if you default in a payment. Lenders usually build in the right to be repaid their expenses for collection, including lawyers' fees. These features can add a lot of cost to your debt.