US Mortgage Support

When you’ve decided that you want to make the investment of purchasing a home, chances are you will have to navigate through an industry marked with language that you just don’t understand. If this is your first time making such an important and expensive investment, you might be overwhelmed by the terminology that you’re getting introduced to.

In this article, we’ll dissect some of these confusing terms and phrases so that you’ll find the steps toward home ownership a bit less mystifying.

Mortgage Terms 101

Adjustable Rate Mortgage – A mortgage that has an adjustable rate is one that has a fixed interest rate only for a certain period of time: usually one to five years. For this period the rate will stay unchanged, but after that it will increase or lower based on an index.

Amortization Period – This refers to the time in which it is expected for the mortgage to be paid in full.

Closing Costs – Home buyers must expect to pay various fees associated with the closing of the sale. This includes attorney and appraisal fees, recording fees, and a multitude of other prospective costs.

Debt-to-Income Ratio – Lenders will evaluate whether or not a client is capable of repaying their loan by assessing their debt-to-income ratio. This calculation weighs the client’s monthly recurring debts to their income to make this determination.

Down Payment – This is the amount that you will pay, as the buyer, and separately from your mortgage loan. Most lenders require a down payment before they will facilitate a mortgage loan.

Equity – If you subtract the amount of money you’ve paid toward the home from the total value of your home, the resulting number is the equity. The equity of a home increases as you make more payments toward the loan.

Fixed Rate Mortgage – Fixed rate mortgages do not experience any fluctuations in interest rates. An interest rate is set for the life of the loan and is not subject to change at any time.

Homeowner’s Insurance – A homeowner’s insurance policy is a necessary part of purchasing a home. It financially protects homeowners in the event of a devastating event, like a fire, and is typically required.

Principal – When you pay toward your mortgage each month, some of your funds are going to the interest and some are going to the principal. The principal is the value of the loan itself, sans interest.

Private Mortgage Insurance – If a buyer is unable to produce a down payment of 20% or more, the lender may bridge the gap but still require the buyer to purchase private mortgage insurance. This insurance protects the lender in the vent of the buyer not being able to repay their loan.

 Categories : American Mortgage Terms Posted by David Selden  Comments Off on An Explanation of American Mortgage Terms

If you have never investigated what it takes to get approved for a mortgage, you might be surprised to learn just how involved the process is. After all, you have tofind a home and a lender, then go through the process of having your application for a mortgage approved through that lender. There are a lot of steps to take before you get final approval, and we’re here to help you prepare for those steps ahead of time.

Get Pre-Approved

While pre-approval might not be 100% necessary, it is a great step that shows lenders that you are serious about taking this step in your life. To get pre-approved, one must meet with a lender who will then assess their financial situation to determine how much of a loan they qualify for –if they qualify at all. Credit reports, debt-to-income ratios and other aspects of your financial means will be examined before you are pre-approved.

One distinct benefit of becoming pre-approved is that the lender will hold the interest rate for a certain length of time –usually two to four months. So, if you decide to go forward with the loan, you won’t be in for any surprises.

Required Documentation

It might not surprise you to learn that there isa lot of paperwork required on the part of the buyer and the seller in such a large transaction. Required documents include, but are not limited to:

  • Verification of employment and income
  • Proof of your identity
  • A copy of the home’s legal listing, including the address
  • A copy of the sales contract
  • Information on how to reach your real estate attorney

High-Ratio vs Conventional Mortgages

Which type of mortgage you’ll seek depends on how much you can afford to pay as a down payment on the home. A conventional mortgage entails a down payment of 20% or more.

A high-ratio mortgage, on the other hand, allows you to make a down payment between 5% and 20%. Because this is a higher risk for lenders, you will be made to purchase private mortgage insurance. Private mortgage insurance protects the lender, not the buyer, in the event that the monthly mortgage payments cannot be paid.

Before you take your first step toward purchasing a home, it’s important that you ensure that you have all of these steps in place. Understand what you can afford as a down payment and contact a lender to get pre-approved before making any commitments.

 Categories : Mortgage Process Posted by David Selden  Comments Off on What Should I Know Before Getting a Mortgage?