Preliminary Mortgage Analysis

After you have gathered information on mortgage options, you need to do one more thing before you begin to shop for a mortgage. You need to conduct a preliminary analysis of the options you've identified.

Why Bother With a Preliminary Analysis?

The main reason for conducting a preliminary analysis before you talk with prospective lenders is educational. There is no better way of educating yourself on the current mortgage market than to personally assess current mortgage options against your mortgage goal. (You have written a mortgage goal, haven't you?)

The knowledge you develop will prepare you for discussions with lenders, loan officers, and brokers. It will help in at least three ways.

• Identify promising options. By evaluating potential mortgage options against your mortgage goal, you will be able to classify options into those that are promising and those that are not. When you finally talk with lenders, you can guide the discussion to areas that are likely to be more fruitful (and less costly) to you.
  
  
• Reveal knowledge gaps. Inevitably, as you conduct the preliminary analysis, you will discover that you are missing critical information or that you have questions about the options under consideration. Make a note to yourself to fill in these knowledge gaps when you talk to lenders.
  
  
• Assess recommendations. When you talk with lenders, they will all claim that their recommendations are better than anyone else's. Having conducted a preliminary analysis, you will have a basis for assessing the quality of their recommendations. And, if need be, you will have the skill to independently verify the validity of any claims that they make.

For these reasons, you should conduct a preliminary analysis before you talk with prospective lenders.

How to Conduct a Preliminary Analysis

If you have read the previous lessons in this tutorial, you already have the foundation needed to conduct a preliminary analysis. This section describes how everything fits together.

• Purpose. The purpose of the preliminary analysis is to identify the mortgage options that satisfy your mortgage goal, at the lowest possible cost.
  
  
• Mortgage goal. The first step is to write out a mortgage goal. > Review goal writing.
  
  
• Mortgage info. The second step is to collect information on mortgage options that potentially satisfy the mortgage goal. > Review finding mortgage info.
  
  
• Mortgage evaluation. And finally, estimate the total mortgage cost for each option. Among the options that satisfy the mortgage goal, note the low-cost options. Think of these as viable alternatives, and temporarily reject the rest. > Review how to find total mortgage cost.
  
  

Congratulations! You are now (finally) ready to talk with lenders and buy a mortgage.