Mortgage Information

If you are getting ready to buy a home, unless you are buying the home outright, you are probably thinking about getting a loan (also called a mortgage). Here are some things you need to know:

Pre-Qualification vs Pre-Approval

You may have heard the terms “pre-qualification” or “pre-approval”, wondered what those meant, and which you should get. A pre-qualification is merely an informal estimate of your income, assets and present debt to estimate the approximate price range you should be looking in for your new home. But a pre-approval means the lender is prepared to offer you a loan of up to a certain amount based on your credit, employment, and income and has determined what loan program is the best fit for you.  A pre-approval is definitely what sellers prefer.

Types of Mortgages:

Mortgages can generally be lumped into two categories:

Fixed Rate Mortgage: Fixed rate mortgages are exactly that – the mortgage rate remains fixed for the life of the loan. Monthly payments are fixed (for the principal and interest – if property taxes and homeowners’ insurance are paid as part of your payment, these are paid through an “escrow” account which can fluctuate from year to year).

Adjustable Rate Mortgage: These are also called ARMs. This type of loan has the potential to have monthly payments that change since the interest rate can change. There is usually an initial period of time where the interest rate does not adjust. This might be a 1-year ARM, 3-year, 5-year, or 7-year. How often the interest rate adjusts will also depend on the loan. Since interest rates do change over time, the payment can either be higher or lower depending on the difference in the interest rate. For example, if someone took out a loan now when interest rates are at record-low levels, it is unlikely that interest rates will continue to be this low when the interest rate adjusts. Furthermore, ARMs generally start out with a lower interest rate than a fixed rate loan.

Getting Started:

When applying for a loan, there are some documents the bank will need, including:

  • Asset and investment statements
  • Bank account statements
  • Credit card statements
  • Auto loan statements
  • Pay stubs for the last two months
  • Verification of other income sources
  • Tax returns and W-2s for the past two years
  • Form of ID
  • And, of course, the mortgage application!

The lender may ask for additional documents, but this will get you started.

Meeting with a lender can feel overwhelming, but it is a critical step if you are buying and getting a mortgage.  I have plenty of lenders that I can refer you to who are fantastic and get the job done. When you are ready, reach out and I will make the connection.

I want more information on buying a home!

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