The mortgage and home buying process has many ins and outs. It may seem complicated and intimidating, but it doesn't have to be. The most crucial step of obtaining a mortgage and purchasing a home is finding an experienced, expert mortgage loan officer. Having someone who can explain, help, and lead you to the best possible outcome is priceless. Here are a few things to know about home mortgages that make the process simpler and clearer.
What is a Mortgage?
Simply put, a mortgage is a type of loan used to purchase or refinance a home.
What is the Difference Between a Mortgage and a Loan?
A loan is a type of financial device where a person receives a lump sum of money upfront and agrees to pay it back over time. Mortgages are a more specific type of loan that secures the borrowed money against a specific real property.
How do You Qualify for a Mortgage?
You can qualify for a mortgage by meeting specific financial criteria. A mortgage lender will consider your income, credit history, debt-to-income ratio, and other factors to determine how much they are willing to lend you for the purchase of a home.
How Does a Mortgage Payment Work?
There are a few different elements of a mortgage payment. The principal is the amount that is owed on the loan. Each monthly payment has a portion allocated toward the principal balance.
The interest you pay each month is based on your loan's interest rate when you obtained the loan and the remaining principal balance.
Typically, taxes and insurance make up the rest of your monthly mortgage payment. Your lender will keep a portion of your payment and place it in an escrow account to pay for your property taxes and homeowner's insurance when they are due.
What is the Start to Finish Homebuying Process?
The home buying process begins with getting preapproved. A preapproval letter from your lender shows home sellers that you can purchase a home up to your preapproval limit. With this distinction, you can begin looking at homes, and when you find one, you can make an offer. Once an offer is accepted, your lender moves forward with the final approval of your mortgage. Final approval includes verifying income, employment, and other financial information.
An appraisal will confirm the value of your property, and a title company will be hired to ensure that there are no underlying or legal issues that would prevent the sale of this home. Once all of this is complete, you will close on your loan, taking ownership of your new home. At the closing, you'll pay your closing costs and your down payment before you sign your mortgage and get your new keys.
If you are considering purchasing a new home, it all begins with finding the right lender. For over 90 years, the experts at Standard Mortgage have been helping home buyers, and homeowners buy and refinance their homes.