Shopping for the Right Mortgage

Following this advice can help you find the loan that meets your needs

Mari Springs’ voice quivers as she relives the tale of raising $4,500 in three months for a down payment on her first home. The 27-year-old needed to get approved for a $98,000 mortgage for a newly built three-bedroom, two-bath ranch in Statesboro, Georgia, but “she assumed her defaulted student loans of $45,000 would stop her from achieving her dream of home ownership. “It was stressful,” says Springs. With a credit score of 600-a score considered poor by industry standards-Springs was determined to forge ahead. “I knew my credit was just fair because three student loans were in default,” she says. “But I also knew that I was tired of renting. I was just throwing money out of the window.”

Springs eventually received 95% of the financing she needed through a Federal Housing Administration loan with GMAC Mortgage in Atlanta. She closed on her house in October. But like millions of Americans who have become recent homeowners Springs wishes she had been more prepared at the outset. “Everything had to be accounted for and re-verified,” she says, referring to the financial documentation lenders require. But now safe and sound in a home of her own, Springs knows opting for home ownership was one of the best decisions of her life.

In part three of our series on home ownership, BLACK ENTERPRISE tells you what you need to know before applying for a mortgage. We’ll highlight important terms, review mortgage options and fees, and show you how to select the best lender. The goal is to arm you with the kind of information that will have lenders knocking at your door instead of the other way around.

GETTING STARTED
A good place to start is to figure out how much mortgage you can afford. That means crunching numbers like your gross income, down payment, monthly expenses, and your credit history by using online calculators at sites like blackenterprise.com and www.bankrate.com.”What most people do, which I think is a complete mistake, is to go out and start looking at homes that are usually way more than they can afford simply because they don’t know any better,” says Ilyce Glink, author of 100 Questions Every First-Time Homebuyer Should Ask (Three Rivers Press; $18). Glink suggests getting preapproved for a mortgage first, which we’ll discuss later. But first, you have to understand the mortgage market.

Kristopher Knight fell in love with the first house he saw, but then decided to do his research. “We didn’t know the housing market, so we started looking around and thought we’d be in a better position to buy now than waiting for prices to go higher,” says Knight, a 25-year-old senior associate with KPMG Philadelphia who bought a $209,000, 3- bedroom, 1- bath Colonial with his 23-year-old fiancé, Lischele Adams.

Knight started surfing the Internet sites like www.realtor.org(the Website of the National Association of Realtors, which offers real estate industry news and statistics) to get a sense of what the market had to offer. “I needed to know more about interest rates and how

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