Mortgage Center

The process of applying for a mortgage loan is quite a tedious one, requiring many details to be taken into consideration both by the lender and the person filling out the application.

With regards to the application form itself – which is basically the first step towards obtaining the mortgage – you will need to provide a lot of personal and financial information, including your employment status and record, insight on your monthly expenses and debts, as well as about what you want to do with the loan and how willing you may be to pay it back in due time.

Applying for Mortgage Loans

The first step a lender will take before considering your application for a mortgage loan will likely be to check your credit history and rating. Credit bureaus have all the information about whether or not you’ve promptly paid your bills and additional debts.

So before applying for a loan, the first thing you need to do is to call one of the credit bureaus (their numbers can all be found in the yellow pages); ask them for help on finding out exactly what your credit profile contains and what lenders can dig out from your credit history.

Preparations and Down Payments

Determined by the value of the property and the condition of your financial situation, the amount you can borrow is the most important piece of information you need to have from the start.

An initial estimate will be made by a real estate appraiser after the ratification in order to provide a fair assessment of the property value, and the results of this evaluation often contribute to whether or not you can qualify for the mortgage loan you are interested in. Your first payment will generally be due either after the appraisal is done or on the HUD-1.

Since there will usually be a difference of about 10-20% between the appraised value of the property and the amount your lender will be providing, the lending agency will require you to provide that amount yourself. And, sometimes, the home itself might be too expensive so not even the combined amount of the loan and your down payment can cover the cost.

If this happens – or if you simply don’t have enough money to provide the down payment – the bank or lending organization, together with your agent, will help you find a solution if there is one.

Required Documents

Depending on the loan type, the complexity of your situation and the lender you’re considering working with, the time before you get your mortgage may differ – usually ranging between 30-40 days in most cases. If you want to get your loan as quickly as possible, the best thing to do is file the application, along with every required document, as quickly as you can, and ask for additional information from your lender about the duration of the application process.

The specific documentation required will include bank statements and account numbers, information on your current debts, as well as your creditors, W-2’s pay stubs and any other papers your lender may require.

In the case of FHA or VA loans, the process can be more complicated and time-consuming. However, many of these documents will be needed regardless of the mortgage loan you apply for, and your best chance is to be organized and avoid wasting time before filing in your application.

Having Your Application Turned Down

The decision on whether or not your loan will be approved greatly depends on the down payment amount you can provide, the appraisal of the property and the way your credit history can impact your status as a buyer.

In case the appraisal or down payment does not favor you, there may be ways you can convince the lender to either consider accepting a smaller down payment or having the property reevaluated – if you find evidence that similar homes in the same neighborhood may have sold for a price comparable to the one you’re willing to pay.

On the other hand, your credit history can give your lender even more doubts, and this is actually one of the most common reasons why mortgage loan applications end up being rejected.

Taking certain precautions from the start can greatly improve your chances in this regard:

Look up your credit history to know all the details and become aware of any potential issues before applying for a specific loan.
Try to shop around before choosing a specific lender. A better offer may improve your chances of getting a better loan with your existing credit rating.
Even if your credit history doesn’t look too good, you may be able to gain the lender’s trust by explaining your situation more thoroughly.
Don’t let a single experience bring you down. Just because you get rejected once, it doesn’t mean another lender might not look favorably upon your situation.

If, for any reason, your application was not accepted, you have the right, according to Federal Law, to be provided with a written document outlining the reason why you were rejected.

While it might not be feasible to apply to the same lender, that information will help you when deciding to ask for a mortgage loan from another bank or organization. By following the tips presented above, you can greatly increase your chances of success.

Considering Different Types of Loans

From adjustable rate mortgages to fixed rate loans, VA, FHA and buy downs, there are numerous types of loans you can get these days. Many of these can come from banks, while others are also provided by private mortgage companies, credit unions or other similar organizations.

Typically, mortgage loan payment periods vary between 15 and 30 years, and the most important thing you need to know is that there’s always a trade-off – with shorter loans requiring either higher interest rates or larger monthly payments.

When it comes to selecting a specific type of loan, however, all the information you need to be aware of and the choices you have to make may be quite overwhelming. As such, it’s a good idea to consult with your agent and loan officer to find a viable solution, while learning about all the various options that may comply with your requirements.

Conventional Loans provide lenders with the opportunity of making a variety of programs available to different types of borrowers. These programs include different PMI offers, down payment percentages, closing contributions as well as a variety of other influencing factors.

Fixed Rate Mortgages allow for the establishment of a stable interest rate during the loan’s entire lifespan. Inexperienced buyers usually prefer this option, as it is easier to understand.

Basically, whether you want to get a 15 or 30 year loan, with fixed rate mortgages, you gain better security and stability. The interest rate will be slightly higher than average, however, since it’s not the safest option from the lender’s point of view. To reduce the consequences of this issue, you could consider talking to your lender about adding an extra payment per year.

Adjustable Rates can usually fluctuate from the start, beginning with lower interest rates and periodically growing or becoming reduced depending on financial indexes, such as the Cost of Funds Index. You have to constantly be careful about the impact these changes can have on your financial situation. However, the good news is that you may be able to benefit from increased equity over time.

Although each lender has a different policy towards them, ARMs (adjustable rate mortgages) can also come with various set periods when fixed year payments may be available. In case you choose this type of loan, you should talk to your lender and real estate agent about the caps, index, margin and various other references associated with the mortgage.

FHA Insured Mortgage Loans have been somewhat more popular with buyers lately, and they are still a preferred choice despite the fact that a mortgage insurance premium has to be added to every loan of this type.

The FHA (Federal Housing Administration) has initially made this loan available for buyers who were unable to provide extensive down payments. The “catch”, however, is that lenders are insured in case the buyer makes the choice to default on the loan.

Two Step and Buy Down Mortgages will start with a specifically defined interest rate that will eventually increase in time. The difference between the actual rate and the buy down interest rate will often be paid by either the buyer or seller – or even the lender in some particular cases.

Even though it might be possible that you’ll end up paying more interest rate for this type of loan than if you chose one of the others, as a first time buyer – and assuming that your wage and position will improve over time – this can be a very advantageous offer.

Veterans Administration Loans require borrowers to be Veterans, and in order to apply, you will need to provide your Certificate of Eligibility issued by the VA, as well as a funding fee. After discussing all the options with your lender, you will find these loans can provide a variety of advantages, such as fixed rates, smaller down payments, buy downs or appealing mortgage insurance options with reliable coverage.

GPMs (Graduated Payment Mortgages) are negatively amortizing loans with payments that grow over a period – usually about 5 years – delimiting and adding the difference between paid and due interest to the loan balance. This process of negative amortization encourages buyers who expect their salaries to increase during the lifespan of the loan to consider the advantage of only starting to pay more after they start their payments.

Closing Details

Closing or settlement costs will be required once you chose a specific type of loan and managed to get it approved in order to close the deal on your new purchase. Upon buying the home, closing details will include numerous costs and fees, including:

loan origination fees
interest
attorney’s fees
lender fees
recording fees
appraisal and survey costs
hazard insurance
home inspection costs
as well as PMI and various discount points that may be added to the mix.

In many states, these costs and fees should be included in the HUD-1, and buyers are encouraged to thoroughly studying them before accepting them along with other closing terms.

If you aren’t clear about some of the terms included in the closing arrangements, it may be a good idea to contact your agent and discuss them. Also, you should keep in touch with your lender to ensure that everything goes well before the settlement date arrives.

Specific Terms Explained

Understanding the various terms outlining fees and costs associated with your closing details is essential for getting a clear picture of what exactly is going on. Following are a few useful details you should keep in mind when it comes to these terms.

When the loan is provided, some of the first fees you have to pay are the loan origination fees. These have to be paid to the lender who facilitated the completion of your loan.
Attorney’s fees will be required for the settlement attorney’s services in order to have all the documents prepared properly. The title search and title insurance binder are the most important of these.
Discount points represent 1% of the total sum of your mortgage loan, and they may also be paid in advance to cover a part of the interest rate.
Title searches are used to discover any liens or potential problems associated with the property, as well as the legal identity of the owner. Most common issues of this type can, however, be cleared in an acceptable amount of time.

Since title searches can be prone to human error, it is a good idea to get title insurance – which comes with loan coverage, as well as full price coverage. And the good news is that many title companies tend to provide a variety of benefits that may include this type of insurance.