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Home Sweet Home

Get a Mortgage

There are lots of reasons why buying a home can be a good investment. For starters, while most investments don't give you any tangible benefits while you own them, your home provides you with a place to live.

When you take a mortgage Opens a new window, you're using leverage Opens a new window to your advantage — committing a little of your own money to make a major purchase, and increasing your equity Opens a new window as you pay off the loan.

That means taking a mortgage may not only put the dream of a home within reach, it can also be a good investment. Historically many homes can increase in value over time, so you have the potential to earn a nice return on your investment. Homeowners may also receive valuable tax breaks. (be sure to ask your tax advisor about the tax benefits of buying a home.)

So are you ready for a mortgage?

Finding a mortgage doesn't have to be intimidating. When you have the right tools, understand your mortgage information, and your lender is open and honest, it can be a simple process. Beware of lenders who hesitate to give you all the details, it's your mortgage!

It's hard to miss all the ads for mortgages on TV, in newspapers, and on the Web, because nearly every financial services institution has entered the mortgage business.

  • Banks, credit unions, and brokerage firms may offer lower rates if you already hold an account with them.
  • Developers can help you get financing if you're considering their properties.
  • Mortgage brokers can help you find a mortgage if you're having trouble, although it will cost more than finding one on your own.

You'll want to look for a mortgage that lets you pay additional principal Opens a new window early in the term of the mortgage, so that you can build equity Opens a new window in your home faster. You'll also want to make sure that your lender doesn't charge any prepayment penalties Opens a new window.

To use a broker or not to use a broker?

Good question. If you have good credit, getting a mortgage can be fairly simple. For some people, it's simple enough that they skip the middleman (mortgage broker) and get their mortgage direct. If you choose to get your mortgage direct, you will most likely get a good deal that could save thousands of dollars. The downside is that you will have to take the time to research the best deals for yourself — taking into account everything from rate to bank fees to closing costs Opens a new window in order to find the best deal.

For those of you who are uncertain about your credit history, or just want more help in the mortgage process, a broker might be a good idea. Brokers are often better at finding the tough deals for people with poor credit, no documentation, etc. Unfortunately, working with a broker will cost you additional money in the form of commission, and may cost you even more in application fees, processing fees, and administration fees. Doing it yourself, or getting the help of a broker are both viable options when it comes to finding a mortgage. But when it comes down to dollars and cents, doing the legwork yourself and getting your mortgage direct (without a middleman) can save you a lot of money.

Which comes first: the mortgage or the house?

No, this isn't meant to be a philosophical question. But thanks to preapproval Opens a new window, you can enter a competitive buying market with your mortgage already guaranteed before you find a house.

Most lenders offer free mortgage calculators on their websites so that you can prequalify Opens a new window, or determine how much house you can afford. Prequalification gives you a ballpark estimate of how large a loan you'll qualify for based on your income and debt, but it's no guarantee that you'll be approved: you still need to fill out an application, provide copies of your paystubs and other financial documents, and authorize a credit check. If you're preapproved, the lender guarantees that you can borrow up to a specific amount, provided your financial circumstances haven't changed by the time you're ready to buy. Some lenders may charge an application or preapproval fee. Getting preapproved might make sellers more likely to accept your bid, since you can guarantee you won't have to wait to be approved for a loan or risk being turned down.