Traditionally, homebuyers have found the
home they wanted before finding a
mortgage.
But some experts suggest
a smarter approach is to investigate your chances of qualifying
first, by estimating the amount you have available to spend and
what you can afford.
You can get a sense of mortgage availability
and current interest rates by:
Watching
the ads in local newspapers and researching online
Contacting
The HSH Associates, a New Jersey-based company
that tracks mortgage rates nationwide and will
sell you a printout of lenders and rates in your
area (www.hsh.com)
Prequalification
You can get an even more accurate
estimate of whether or not you’ll be approved
for a mortgage by getting prequalified. When you prequalify
for a loan, the lender will tell you if you’ll
qualify for the mortgage and how much you can borrow.
But there’s a fee for prequalifying,
so it doesn’t make sense to apply until you’re
serious about buying and have started the search for
a home.
Where mortgage money comes from
The bank or credit union you
go to for a home loan doesn’t use its own funds
to lend you money. Most mortgage money comes from
three major institutions, Fannie Mae, Freddie Mac,
and Ginnie Mae, that buy loans from lenders, package
groups of them as
mortgage-backed securities,
and
sell them to investors. By selling the securities,
Fannie Mae, Freddie Mac, and Ginnie Mae raise cash
to buy additional mortgages, providing lenders more
money to lend to new borrowers.
