It is important that your own research is done before applying for any loan, you have to be knowledgeable in the field that you’re going to make one of the biggest financial decisions in. It is also important to shop around for the best mortgage loan rate before one is picked.
This information was put together by general questions asked by users and answered to the best of our ability. For more personalized responses, contact your mortgage lender regarding your loan.
What is a mortgage loan?
A mortgage loan is a loan that is secured by real estate or property. In exchange for funds received by the home buyer to purchase the home or property, the buyer promises to pay back the loan to the lender within a certain time frame at a certain interest rate. If the buyer defaults on the terms of the note, then the lender has the legal right to claim buyers home.
Until the loan is paid off the lender owns the property or the home.
What information do the mortgage lenders need?
Typically, the information needed will vary from buyer to buyer, but it is quite simple.
Common documentation will include:
- Drivers license
- Social security card
- Bank and asset statements
- A fully executed purchase contract
- Pay stubs
After obtaining the mortgage, there will be additional requested information including:
- Updated pay stubs
- Updated bank statements
- Verification of employment
Are pre-qualification and re-approved that same thing?
What does pre-qualification of a mortgage loan consist of?
Pre-qualification will consist of a brief talk between you and your potential lender about your income, assets and the amount of down payment you can afford. It is quite simple to get pre-qualified.
What does pre-approval of a mortgage loan consist of?
Pre-approved is another bridge you have to cross. Your lender will need verification of your financial information, they will then submit the loan with your information for preliminary underwriting.
Think of it as pre-qualification being step 1 in the process and once you get over that hump you can move forward with step 2, pre-approval, which gives you the start home searching.
As your search begins you will have a pre-approval notice that will give the home sellers a sense of security and honesty knowing that you are a serious and potential buyer.
How much can I afford a month?
This is a crucial question you have to ask yourself because the home you buy can quickly escalate from an asset to a liability that you can’t afford to pay.
There are many useful resources that can be helpful when deciding how much you can afford a month to live comfortably.
Home affordability calculator
Input your annual income, down payment and other information into the home affordability calculator to help you estimate how much can fit into your monthly budget.
You don’t want to exceed a debt-income-ratio of more than 36% because that can limit the amount you’ll be able to borrow for your preferred lender.
The mortgage calculator will help you estimate your monthly payment by inputting the home price, down payment, interest rate along with any homeowners insurance or monthly HOA dues as well.
It is and easy to use that will facilitate your home buying process.
How do I decide which mortgage is best for me?
There are many mortgage loans to choose from but it is important to know which loan will be the least expensive and the best-personalized rates for you.
- Adjustable-Rate Mortgage (ARM)
- Federal Housing Administration (FHA) Loan
- Department of Veterans Affairs (VA) Loan
- Fixed-Rate Conventional Loan
What will my mortgage payment include?
Wouldn’t it be nice if all the money you send to pay off your mortgage could go entirely to your principal? Yeah… I wish.
Below is what a typical mortgage payment includes:
- Homeowners insurance (if you have insurance)
- Property taxes
- Private mortgage interest (only if you put down less than 20%)
If you want to pay off your principal quicker than specify what you want the money towards because if not it can be added to the prepayment of the interest amount.
What happens when I close and how long will it take?
You, the buyer, will be responsible for paying the closing costs which comes out to be 3-4% of your new home purchase price. Three days before closing, you will receive a Closing Disclosure that will provide you with all the information, so you know exactly what to expect on the day you close.
Overall, it usually takes an average of 40 days. There are many factors that could make lengthen or shorten the time frame, including the length of your contract and/or any changes made, your financial situation, and your loan type.