How To Get A Mortgage

Yesterday I had the privilege of helping my father find a car at a local dealership. Our car salesman was a young 20-year-old. After spending a few hours there, and many conversations, he found out that I was a licensed Realtor. One of his questions was, “How do I get a mortgage?” I explained a few basic things to him. This interaction yesterday gave me the idea for this post. Let’s get started!

DISCLAIMER: I am not a mortgage lender. I am a licensed Realtor here in the state of Louisiana. All the information that I will provide in this blog is from my personal experiences. If you need specific information for your specific needs, I suggest you to talk to a lender.

QUICK SIDE NOTE: The following information that I am going to lay out here is in chronological order (or close to it). These are the steps that I took to take my credit score from low 500s to almost a 800 credit score.

1. GET EDUCATED: One of the first things that I did before I got a mortgage, was that I educated myself. I got sick and tired of having terrible credit, and having to pay more because of that. I was also financial illiterate as well, meaning that I knew absolutely nothing about investing, retirement, or anything in that realm. Nobody ever taught me about personal finance. So in December 2018, I opened my very first credit card, a Capital One Secured card. And in 2019, as a New Year’s resolution, I vowed to myself that I would teach myself and be better with everything personal finance.
   • To this day, I still educate myself on personal finance. That small New Year’s resolution turned out to be a very deep, deep, passion of mine. Personal finance is one of my favorite topics of conversation to talk about. Just ask my wife!
2. TAKE ACTION: The next thing I did after educating myself on topics like credit score, credit cards, investing, and so on, is that I took action! I started applying for more credit cards, some that I got approved for, and some that I got denied for. I got approved for about 2-3 new credit cards every year. By doing this, this improved my credit score.
   • So let me explain in more detail why I opened so many credit cards. Some might think this is crazy, and others might think this was smart. So if you don’t know, your credit score can increase based on the number of accounts you have open. This can include car loans, credit cards, student loans and so on. So, I planned on opening so many per year, and pay them off every month so that it reflects that I can manage money well. And it worked! So the main thing to remember here is to pay all your bills (accounts) in a timely manner each month and you should see your credit score increase. If you don’t pay your bills on-time, your credit score will tank.
3. DISPUTE ALL ERRORS: This step is VERY important! Now you might be wondering what this is, and that is okay. A quick explanation on what this is, is that you look at your credit report and make sure everything is correct. If anything is incorrect, dispute it! This includes incorrect address, incorrect balance, incorrect name, and so on. This helps protect you and your identity, so take this serious.
   • I believe that I have only needed to dispute something on my credit report once. I had a hard inquiry that had just went past its two year mark by about a month or two, I disputed it, and it was instantly removed from my credit report. For those of you that don’t know, hard inquiries fall off your credit report after two years, so if you see a hard inquiry still lingering around, dispute it A.S.A.P. and help your credit score like I did.
4. SAVE THAT MONEY: Now the next step that I personally took, and also my favorite, was that I saved as much money that I could. As I said earlier, personal finance has been a deep passion of mine since 2019. I started becoming very conscious of how or where I spent my money, (never was a big spender to begin with), but I knew exactly how much money was coming in, and how much money was going out every month by tracking my spending. This is when I created my first actual budget, and noticed how much money I had leftover. I was so ecstatic, that instead of having my money sit in my checking account making me no money, I began researching how to invest. This is also the time I made a long-term goal to try and retire at 50-years-old. So all this extra money leftover, I started shoveling into a Roth IRA and a high-yield savings account. This money would compound over time that would soon lead into enough money to have a down payment on a house, plus all the fees that come with it.
   • Now for this step, I could go into much further detail on this, but I will probably save that for a different blog post. The main thing to know here is to remember a few things. Here is a short list:
     • Live below your means
     • Create a budget and stick to it
     • Cut back on current expenses (food, housing, any bills). You should always try and find cheaper rates for things like car insurance and so on. This helps put money in your pocket.
     • Get excited about saving money. If you’re like my wife, you might not get excited about saving money, and that is okay. Find an alternative to get excited about so that it CAN help save you money. For example, you might value your freedom, so saving money for retirement to retire sooner rather than later can get you excited so you can obtain all the freedom the world can give you. Or you might like to travel, and traveling makes you happy, so thinking about saving money to travel this year or in the future can help you save that money. Point is, find what makes you happy, and find a reason to save money. We all have that potential to save money.
5. TALK TO A LENDER(S): Now that you have done the previous steps, now you are moving onto the final step, and that is to call a mortgage lender(s) and see how much you can qualify for. I personally did this, and had lenders giving me different amounts on how much my wife and I qualify for. Some lenders have only specific products, or run your information through a certain system, so I encourage you to shop around, just like car insurance for example, to make sure you can get something reasonable. Just be aware of the fact that you don’t overspend either! If you have a lender trying to qualify you at the maximum debt-to-income ratio, that is too risky of a mortgage to take on. So make sure you ask a lot of questions, and you understand everything the lender is explaining to you.
   • I want to further touch on the debt-to-income ratio. Lenders are in the business of making mortgage contracts and taking them to closing to finalize a deal. Be aware of shady lenders, just as there could be shady people in any profession. If you feel like a large mortgage payment could “break the bank”, then it is best to say that those terms of the mortgage is no good. Look for a lower monthly payment that is absolutely doable, and that you are comfortable with.

Well, that is going to wrap up this blog post. I enjoyed making this blog on this topic, and I am thankful for the inspiration that came from it at a car dealership. Some people have no clue where to begin when it comes to getting a mortgage, or anything personal finance.

If you found this to be helpful, and possibly learned something new, I ask that you share this blog with someone you know that could benefit from this.