|
What Do I Do After I've Found The Home I Want To Purchase?
It is time to contact the seller who may be an individual or an representative of a real estate agency.
Negotiations can begin for the sale of the property. Once the buyer and seller have agreed on a purchase
price and developed sales agreement, it is time for the buyer to apply for a loan.
How Do I Apply For A Loan?
Applying for a loan is very simple and straightforward. If you would like to go ahead and try to pre-qualify
or submit a loan application, please fill out the prequalification form by
Clicking Here.
What's The Best Way To Approach Buying A Home?
Buying a home is not a difficult process. It is basically a ladder of events. Follow this guided tour to
buying your own home. Click Here to Begin.
What counts in the loan application process?
Your Income:
The amount of income you earn will determine the amount of money you can borrow to purchase
your home. For example, if a person makes $5000 a month and spends $1600 on a mortgage loan,
including property taxes, mortgage insurance and hazard insurance, the housing expense ratio
is 32% (1600 divided by 5000). Normally to qualify for mortgage loans lender may spend a
maximum of 33% of their mortgage payments.
Your Debts:
The lender will look at the monthly debt such as loan payments, charge cards, child support,
made monthly by the applicant. The percentage of debts to income is known as the
debt-to-income ratio. A good
goal is to spend about 38% of your income on all debts including the contemplated mortgage
payment.
Your Employment History:
It is important for the lenders to see a steady employment in any occupation held by the
applicant. Mortgage lenders are more likely to lend money to people who have worked several
years at the same job or the same type of job. A Verification of Employment Document will
be requested by the lender to verify your work history.
Your Credit History:
Each borrower has a credit history report that is filed with the Credit Bureau. Lenders receive
a copy of your credit history in the loan application process in order to determine your
willingness to pay as a borrower. This assessment depends on your credit record, ie. if you have
been late on your various payment obligations.
What Is The Property Worth?
The lender will want to know the value of the prospective home. The loan amount approved will
depend on the value of the property to be determined by an appraiser. This appraisal is to
ensure that the lender can recover the money he lends, even if you stop making payments. If
the borrower fails to repay the loan, the lender has the right to sell the home to pay off
the loan -- a process known as
foreclosure.
How Do I Know Which Loan Program Will Benefit Me The Most?
There are various types of loan programs design to suit the financial needs of individual borrowers.
In deciding the type of loan program for which you would like to qualify, it is important to consider
your loan amount ......
Loan Type:
First, the two types of loans are a conforming loan and a non-conforming/jumbo loan. Conforming loans
are for amounts $50,000 to $214,600. Jumbo loans cover loan amounts between $214,600 to $650,000.
Higher loan values have special quotes. Loans can be fixed or variable (ARMS). Fixed rate loans are
amortized over a period of 30, 15, or 10 years. Due to shorter commitments for rates, ARM (Adjustable
Rate Mortgage) rates are typically lower than longer term rates. These are best suited for transient
borrowers.
Loan Amortization:
A loan can be amortized over a period of 30 years, 15 years, or 10 years. Adjustable rate mortgage
loans will have rates for a shorter period of time. A shorter amortized loan will build up your equity
faster and will therefore provide you with a debt-free home; however, mortgage payments are hirgher
for shorter amortized loans.
Loan-to-Value:
The loan amount you receive will depend on the appraised value of the property and how much down payment
you can afford. If you are purchasing a $100,000 home with $20,000 down payment available, it will be
necessary to borrow an amount of $80,000 from a lender to purchase the property. This will be 80% of
the home value; therefore, the loan-to-value of your mortgage is 80%. LTV's can be as high as 97%.
What Does It Mean To Have 0 Points or 1 Point or 2 Points?
A point is one percentage of the loan amount. Lenders offer rates which may be lower but require paying
points. A rate of 7.875% with 1 point for a loan of $100,000 would require the borrower to pay a total
of $1000 to the lender upon settlement of the loan. A rate of 8.000% with 0 points will require no
payment to the lender, but the interest rate is slightly higher. Points will lower rates and are of
benefit if you have some cash for the down payment and can therefore lower the rate. You should intend
to keep the loan for its full term.
How Do I Get Pre-approved For A Loan?
Pre-approval is a new trend in the mortgage industry that allows a borrower to be pre-approved for a
loan before shopping for a home. Sellers and real estate agents will know you are a serious and
qualified buyer. Pre-approval can be obtained within seven days of filling out the
online loan application. Final approval of the
loan will be subject to an appraisal of the property.
What Documents Are Needed To Process My Loan?
The loan requires certain documents for approval. These may include credit reports, the loan
application, an appraisal of the property, income verification, asset verification, and various
other documents depending on the complexity of your personal financing situation.
Who's Who In The Housing Business?
Real Estate Agent/Broker
When you first start looking for a new home, contact a real estate company in the area that you
are planning a purchase. The real estate professionals will show you many available houses in
your price range that will meet your personal needs. When you decide on a home to purchase, make
an offer on the home. The real estate broker will present your offer to the seller. But please
remember that the broker is under contract to the seller to represent the seller's interest.
When an agreed price has been reached, it is necessary to draw up a sale of contract document
signed by both the buyer and seller.
Mortgage Brokers
The mortgage brokerage firm has loan officers who will find the best loan program to suit your
financial needs and concerns. The mortgage broker represents numerous wholesale lenders and
typically searches for the best program and rates to suite your particular needs.
Loan Officer
The loan officer will be the buyer's liason to the lender for obtaining a loan.
Lender
Banks, savings and loans, and mortgage companies lend money to home buyers. Your lender will
ask you to fill out a loan application form that includes information about your income,
employment, and debts.
State or Local Housing Finance Agency
Some government agencies provide valuable housing assistance to low- and moderate-income home
buyers and renters. To find out more about these programs, ask your real estate agent or your
mortgage broker.
Property/Mechanical Inspector
For a fee, a qualified inspector will examine the home you've chosen from basement to attic.
The inspection includes an evaluation of the home's plumbing, electrical work, appliances, the
furnace and/or air conditioner, roof, and structural stability. These inspections can save you
thousands of dollars in the future, and the knowledge of flaws can help you negotiate a better
price on the house.
Appraiser
The appraiser will be hired by the mortgage broker or lender to determine the
market value
of your prospective home based on its condition and the selling prices of comparable homes recently
sold in the area. This estimate helps the lender decide a reasonable loan amount for the mortgage.
Mortgage Insurer
Mortgage insurance makes it possible for lenders to offer mortgage loan options to buyers with
small down payments. If for some reason you can no longer make your payments, mortgage insurance
helps cover the lender's losses.
Underwriter
The underwriter works for the lenders in reviewing all the documentation involved with your loan.
Once you've applied for the loan and found the loan program appropriate to your needs, the mortgage
broker will begin the paperwork to provide all the supporting documents required for the approval
of the loan. These shall include employment history, credit reports, the appraisal of the home,
verification of employment, the uniform loan application, and other documents.
Attorney/Closing Agent
The attorney or closing agent is responsible for ensuring that all documents have been completed
properly including those related to the title search and title insurance. The closing agent will
explain all closing documents to you and the seller, obtain your signatures, and record the
documents with the appropriate local governments. He or she also will collect the transaction
fees and give them to the appropriate parties.
What Do The Words Amortization, Escrow, Principal, Foreclosure, PITI, And Closing Mean?
These words may ring a bell or seem completely foreign. But they are very important concepts to
understand when applying for a loan.
Amortization
Gradual debt reduction. Normally, the reduction is made according to a pre-determined schedule for
installment payments.
Escrow
An account set up by the lender into which the borrower makes periodic payments, usually monthly,
for taxes, hazard insurance, assessments, and mortgage insurance premiums.
Principal
The original balance of money loaned, excluding interest; also, the remaining balance of a loan,
excluding interest.
Foreclosure
If the borrower fails to pay back the loan through mortgage payments, the lender has the right
to put the home on the market for sale to recover the money owed to the lender. This is known as
foreclosure.
PITI
Principal, Interest, Taxes, and Insurance are the components of a mortgage payment.
Closing
The conclusion of a transaction. In real estate, closing includes the delivery of a deed, financial
adjustments, the signing of notes, and the disbursement of funds necessary to the sale or loan
transaction.
How Long Before I Can Get My Loan?
The settlement closing of a loan requires about 30 days from the date of the locked-in rate. While
at settlement, you will read and sign numerous documents related to the purchase or refinance of
your property. Your settlement agent will be able to answer any questions you may have regarding
these documents. Settlements usually run smoothly and are completed within 60 minutes.
What Are Closing Costs?
Once a loan has been approved by the lender, the buyer is asked to go to settlement to sign papers,
and the loan process is complete! There are certain costs involved in closing a loan which usually
amount to about 2%-6% of your mortgage loan. For example, if your mortgage loan is $85,000, your
closing costs might range from $1700 to $5100. These closing costs will be in addition to your down
payment on the house.
Origination Fees
Your lender will charge a fee to cover the administrative cost of processing your loan. This fee
is usually a small percentage of the loan amount.
Items Paid in Advance (Prepaid Escrows)
Most lenders require you to pay for some items that will be due after closing. These pre-paid items
usually include first year insurance premiums (for hazard and mortgage insurance) and real estate taxes.
Title Charges
A title is the document that shows who owns a property. It is necessary for an attorney to examine
a title to make sure there are no problems that would prevent you from having "clear"
(legal) title. It is also necessary to get title insurance in case someone else should try to claim
title to your property. Fees for title examination and title insurance will be included in the closing
costs.
Recording and Transfer Charges
A record of your home purchase will be on file with your local government , and there is a small fee
to cover the cost of paperwork.
Attorney's Fee
This fee is to pay the attorney or closing officer for preparing and reviewing all of the documents
needed to close your loan.
What's In A Mortgage Payment?
Mortgage payments consist of costs for principal, interest, property tax, hazard insurance, and
mortgage insurance.
Principal
The principal is the amount of money you borrowed. Each month when you make your mortgage payment,
you are paying back a small portion of the principal. The longer the payments are amortized (over
30 years for example), the more the payments go to reduce the principal you owe; over time, interest
will become a smaller part of your monthly payment. In the beginning, most of the mortgage payments
made to the lender will be interest payments.
Interest
Interest is the cost of borrowing money, usually expressed as an annual percentage of the loan
amount - for example 8.125%, 9.000%, etc. Lenders will offer different rates depending on the
type of loan program offered.
Property Taxes
These are taxes paid to local governments, usually charged as a percentage of the property value.
Your lender collects the taxes through your monthly payments. The amount of tax will vary depending
on the location of the home.
Hazard Insurance
This is a contract that protects you from any financial losses on your property that might result
from fire, flood, or any other "hazards."
Mortgage Insurance
This is an insurance policy that pays mortgage lenders for part of their financial losses if a
borrower fails to fully repay a loan. Mortgage insurance makes it possible to buy a home with
a low down
What Types Of Insurance Do I Need To Know About?
Private Mortgage Insurance (PMI)
A lender will require you to purchase mortgage insurance if you make a down payment
of less than 20% of the market value of the home. There are different types of insurance
available which often affect the type of mortgage loans you obtain.
1. Conventional Mortgages
2. FHA Mortgages
3. VA Mortgages
Title Insurance
Title insurance will be included in the closing costs to insure that no other party can claim
title to your property.
Hazard Insurance
This insurance is a contract that protects you from any financial losses on your property that might
result because of fire, flood, or any other "hazards."
What Is Refinancing, And When Should I Apply For It?
Refinancing involves obtaining a new mortgage loan on a property already owned - often to replace
existing loans on the property. When the mortgage rates are low, it may be a good time to refinance.
Refinancing can save you money on your monthly mortgage payments.
What Is A Rate Lock-In?
A lock-in, or rate lock option, ensures the borrower a commitment to a specified mortgage rate,
including not only the interest rate but also its discount/origination points.
| 
