We want to make buying a home as easy as possible.
When considering buying a home, you may find yourself faced with a lot of new information to discover. It can seem intimidating at first, but we can help you find what you need.
What is a Mortgage?
A mortgage is a loan that a bank or mortgage lender gives you to help finance the purchase of a home. There are many different types of mortgage loans and we have experienced professionals that can council you on which loans will fit your budget and lifestyle.
There are 5 main items to think about when looking at home loans:
Interest Rates: Will you want a Variable Rate (ARM) or a Fixed Rate Loan?
Variable Rate Loans provide a lower initial rate, with variable terms for the life of the loan. Variable rate loans are typically a good option if you plan on keeping the home for a short amount of time.
Fixed Rate Loans provide a steady principle and interest payment over the life of that loan. This type of loan provides stability and financial management and it the most common type of home loan.
Payments: A monthly mortgage payment is made up of Principle, Interest, Property Taxes, and Home Owners Insurance. If you are financing over 80% of the home value, then an additional monthly payment of Private Mortgage Insurance will be included
Down Payment: A down payment is a cash deposit you make on your home. Typically the higher down payment a borrower has, the better the interest rate and the more home a borrower can afford to purchase
Income Qualifications: How Much Home can I afford? A lender will look at a number that is referred to as “Debt to Income Ratio” or “DTI”. An accounting of your monthly income vs. your monthly obligations will make up this ratio. Most lenders are going to look for a number no more than 43%.
Credit Score: Credit scoring has a direct effect on how much you can finance to buy a home, as well as the interest you will pay on that loan.
A lender will look not only at your outstanding obligations, but also how you are paying those obligations. They will also look at balances to limits and any derogatory information or judgements. You are able to obtain a free credit report each year at www.annualcreditreport.com. There you can check for any incorrect information and get an idea of where your credit profile stands.
The mortgage process seems complicated, but it doesn't have many steps. Here is a sample process:
- Application: Here is where the lender will gather the required personal and financial information and pull a credit report.
- Documentation: Based on the information provided in your application your lender will require financial documentation for the loan file. Examples include: paystubs, tax returns, asset statements, property information.
- Underwriting: An underwriter will look at the application for credit, all provided documentation, and the appraisal of the home you are looking to buy. Once the review is done they will be able to make a loan decision. Note: all lenders are required to provide a loan decision within 30 days of an application being taken.
- Final Documentation: After all conditions of the loan have been met, the lender will prepare your final loan documents that will be signed by you, the borrower. The documents include a Note (loan agreement), Deed (this places the loan onto your home's title), and various other documents as required by your lender or the state yo/re buying a home in.
Buying a house is a big deal. A lot goes into the process of being approved, finding the right home, buying it, maintaining it, and being able to afford it. All of that dims in comparison with the wonderful feeling one can have when they sign all the papers and step into their very own home for the first time. Take the time to savor what you have accomplished and let us help you get there without any fuss!