What to Do before You Apply

When the time comes to apply for a mortgage loan, you want to be sure that you're amply prepared. Here are three things you should do before you apply for your mortgage.

1. Find out your credit rating or FICO score.
   
   Your FICO score will be one of the most important determinants of the interest rate on your mortgage loan. This score indicates to lenders your ability to pay back a loan. If you've always repaid your loans on time, you will have a high FICO score, and this signals to lenders that you will be likely to also repay your mortgage loan as agreed. If you don't have a very good credit score, Mortgages Explained recommends holding off on buying a house for a while. Take some time to improve your credit first. Pay down your debts, pay your bills on time, and correct any mistakes on your credit report. Even small improvements in your credit rating can have a massive impact on your interest rate.

2. Figure out the cost of borrowing.
   
   When you are trying to get mortgages explained, one of the biggest points you must understand is that you will be paying back more money than you borrow because of interest rates, charges, and other fees. Before you apply for a loan, find out the current market interest rate. This will help you decide which lender has the best rates. Also compare the APR of various loans because the APR reflects the total cost of borrowing.

3. Know how much you can afford to borrow.
   
   You can find calculators online that will help you figure out how large of a monthly payment you will have given certain down payments and interest rates. Experiment with different numbers to get a more accurate idea of how large of a loan you can afford. Also look at your monthly expenses to calculate what kind of a mortgage payment you can fit into your budget without struggling. Don't forget to leave yourself a little breathing room for unexpected expenses.

If you are confused about any terms so far, be sure to read the glossary for a better understanding.