The mortgage loan process can be very overwhelming if you don’t know what to expect. It’s an intense process that takes a very close look into your finances. Fortunately, the process isn’t a secret. If you know what’s going to happen ahead of time, you can be prepared with all the necessary documents and information. The loan process and move ahead smoothly and in a few weeks, you’ll be moving into your new home.
Application Form
At the start of the mortgage application process, you’ll complete a paper application that requests some basic information about you, your income, employment, monthly expenses, and the house you want to buy. The lender will ask a lot of questions about your current financial condition. These questions are aimed to figure out how much you can afford to pay for a mortgage each month. [More]
When you get a mortgage loan, your arrangement may involve an escrow account. If you are unfamiliar with the term, it is important that as a homeowners you understand how an escrow actually works.
What Is an Escrow?
An escrow account is opened on behalf of the homeowner. When money is deposited into an escrow account it is held by a neutral third party generally known as the escrow agent who works for both the borrower and the lender. The role of the escrow agent is to release the money per the terms of the loan agreement instructions. [More]
Adjustable rate mortgages (ARMs) have gotten a bad rep since the mortgage meltdown. ARMs aren’t bad though, which is why so many homeowners signed up for them during the housing bubble. There are good points and bad points to an adjustable rate mortgage loan.
Con: Unpredictable Payments
An ARM is a mortgage loan that has a variable interest rate. The interest rate on the mortgage changes on some periodic basis, like monthly or annually. Since the mortgage rate changes, so does the monthly mortgage payment. That’s one of the downsides of an ARM, you won’t always know what your mortgage payment will be from one month to the next. That makes it hard to budget for your mortgage. [More]
One of the first rules of getting a mortgage loan is shopping around and negotiating the best deal. You should do this before you start shopping for the house because the size of your mortgage dictates the house you buy. When you’ve done all that shopping and negotiating, you want to make sure the deal is still on the table once you’ve found the house. To make that happen, you should get a lock-in.
When to Get a Lock-In
There are basically two times in the mortgage loan process that you should get a lock-in. The point at which you actually lock-in your mortgage terms will depend on your lender. Some lenders let you lock-in mortgage terms when you’re pre-approved for the mortgage. Pre-approval usually happens before you start house shopping. [More]
Buying a home for the first time stirs plenty of emotions. You’re elated to be purchasing your first home, but a little wary of the buying and mortgage process. As you’re shopping and searching for your house and your mortgage loan, keep these things in mind.
You shouldn’t make an offer on a home until you’ve been pre-approved.
Know that there’s a difference between getting pre-approved and pre-qualified. Pre-qualified means you’ve been given an estimate based only on information you’ve told the lender. Pre-approved means your credit and income have been checked and you’re more likely to get a loan for that amount. If you make an offer before you get pre-approved, your offer may be higher than what a lender is willing to loan you. [More]
For years, home ownership has been considered the American dream. Before you take on this huge responsibility, you should assess whether you’re ready for that dream to come true. As much as you may want to purchase a home, the truth may be that you simply can’t handle the financial responsibility. It’s better to wait to buy a home, than to get one you can’t afford.
Do you plan to move soon?
Home ownership makes the most sense for people who plan to live in their homes for more than five years. That’s because during the first few years of your mortgage loan, you’ll only be paying interest. You won’t have gained enough equity in your home until you’ve been paying for several years. If you happen to make some money off a home sale within the first couple of years, you may owe capital gains taxes on the profit. [More]
Two major types of mortgage loans exist: the fixed-rate mortgage and adjustable rate mortgage. A fixed-rate mortgage is pretty straightforward – the interest rate stays the same for the life of the loan. Adjustable rate mortgages, or ARMS for short, are far more complex. These mortgages have interest rates that fluctuate over the life of the loan. Because the interest rate for an ARM changes, so does the monthly payment.
Adjustment period
The adjustment period is the period of time between interest rate changes. Interest rates on an ARM can change anywhere from monthly to annually, sometimes even every five or fifteen years. The shorter your adjustment period, the more often your interest rate will change. [More]
Imagine making an offer on the home of your dreams: three bedrooms, two car garage, great yard, quiet community. Then, imagine having to take back the offer because you don’t qualify for a mortgage large enough to buy the home. You can save yourself the heartache of missing out on your dream home by knowing ahead of time just what size mortgage loan you qualify for. Get pre-approved.
Mortgage pre-approval is like going through the application process before you ever start looking for a home. The mortgage lender looks at your income and checks your credit history, then tells you how much mortgage you qualify for. Many lenders will lock-in this mortgage amount and guarantee that you can borrow that amount, assuming nothing about your financial situation changes. [More]
For most every homeowner, a mortgage loan was necessary to avoid buyers having to pay the total home price in one lump sum, something most of us can not afford to do. When you take on a mortgage, you have the financial obligation to make on-time payments based on the price of the loan plus interest, taxes, and insurance.
Structure of a Mortgage Payment
Essential components of a monthly mortgage payment will depend upon the amount of your mortgage loan and the terms within the loan. The term of the loan is the length of time you have to pay back the loan in full. Longer terms, like the traditional 30 year term, will result in smaller monthly payments for the borrower but for a longer period of time. 30 year mortgages will also cost the buyer more overall when interest is factored into the equation. A shorter term loan, like a 15 year mortgage, will make the buyer pay much higher payments each month but will also more money to be applied to the principle of the loan. A 15 year mortgage will allow you to be a homeowner in a faster period of time and save you a lot of money in interest charges. [More]
When it comes to mortgages, you can choose how long you want to pay because mortgages come in different lengths. Of course, certain types of mortgages require you to have better credit than others. But, assuming your credit is good enough to have your choice of mortgages, let’s look at the different mortgage loan options and discuss how you can choose the best one for you.
Fixed rate mortgage options
A fixed rate mortgage has the same interest rate and monthly payment for the length of the loan. A fixed rate mortgage is the best option for a homebuyer who plans to live in their home for at least 10 years. With a fixed rate mortgage, you’ll enjoy the stability of having the same mortgage payment every month.
Fixed rate mortgages come in 10, 15, 20, and 30 years. Interest rates typically go down as the mortgage length goes down. For example, a 30-year and 20-year mortgage interest rate may be 3.75%, while the 15-year and 10-year is 3.25%. Even though interest rates are lower on shorter-term mortgages, monthly payments are higher. But, the benefit is that you’ll pay much less interest over the life of the loan. [More]
