The question asked most commonly by first time homebuyers is, “where can I find a loan?” The answer is as simple as it is difficult. There are sources of home mortgage loans everywhere. The real question is which lender is the right source for the buyer.
Banks are probably the most common source of home loans. This does not necessarily mean that they are the best source. While some banks offer competitive rates, and attractive incentives, not all banks are the most economically sound source of financing. Banks typically service many areas in the world of financing, and few specialize in home mortgage loans. Often, a better deal can be found through other sources.
There are many institutions that specialize in home mortgage loans. These institutions are usually referred to as “mortgage brokers.” Many of these mortgage brokers offer their services, from consultation, to application, to closing, either partly or fully online. The smart shopper will be sure to investigate all financing options fully before making a final decision.
- Before you even begin shopping for a home you need to do some preparation.
- Determine your yearly income.
- Determine your current yearly debt.
- Determine how much cash you have to offer as a down payment.
- Find a mortgage lender.
- Get preapproval
Your yearly income will have a significant impact upon the amount that you will be able to borrow from a mortgage lender. Most lenders agree that you will typically be able to afford a home that is two to three times your yearly income.
Your current yearly debt will also significantly impact the amount of money that you will be able to borrow. Lenders typically like to see borrowers with lower debt in comparison to their yearly incomes. In short, the less you already owe, the better.
The amount of cash that you have available to use as a down payment is also important. Lenders generally expect borrowers to pay a down payment that is approximately 20% of the purchase price of the home.
Shopping for a lender is easier now that ever before. There are online resources that are designed to help you find a mortgage lender who will help make your home buying experience efficient, valuable and rewarding.
Once you have found a mortgage lender, work with them to get preapproval. In many cases you can apply online. Preapproval will let you know how much money you will be able to borrow. This will save time and effort when shopping for a home.
Once you have located the home that you wish to purchase you will need to begin the process of application for your mortgage loan. Often, your application can be completed online. This usually holds true when dealing with online lenders and mortgage brokers. In some cases, however, a vast number of paper documents must be filled out. In any case, this process will be much faster and easier if your mortgage lender has preapproved your loan.
The Application Process
The application will be used to determine a number of things, such as the type of mortgage and your interest rate. Mortgages and interest rates vary dramatically from lender to lender. Interest rates change on a daily basis, therefore, timely completion of the application is important to both the lender and the borrower. The application will also be used to determine the length of your mortgage as well as how much your monthly payments will be. These factors also vary greatly from lender to lender.
Finally, the process of application will be the time when all of the fees related to your mortgage will be calculated. These assessments will include fees such as brokerage costs, insurance fees and closing costs. The varieties of fees that are charged, as well as the amount, differ from mortgage to mortgage. As a result, you will want to pay close attention to every detail of the application process.
Closing The Deal
This is the big day! Sometimes called “the settlement” or “settlement day” and occasionally referred to as the “close of escrow,” closing day is when all of the magic happens. After your loan has been approved, you will meet with the seller, the real estate broker and your lender. Occasionally, lawyers are involved in these meetings as well.
Closing day is when you formally receive title to the home that you are purchasing. As a result, large amounts of money are exchanged at this time. At the closing you will pay all of the closing costs such as origination fees, insurance fees, processing fees and brokerage fees. This is actually all part of the finalization of the application process.
This is when you will sign your settlement statement, the document that includes a line-by-line description of each and every financial component of your mortgage, including everything from the amount of the loan to the final closing costs. Again, it is very important to pay close attention to every detail of the process. This is the point in time when the home finally becomes yours. Congratulations!