Mortgages are a crucial step in the home buying process and can be easily confusing, especially if you're a first-timer. With different types and a variety of requirements, it’s important to understand what a mortgage is and when you should consider it. As intimidating as the process can seem, finding a trusted lender, like Dee Ayers, will make it much easier and leave you with many benefits. Continue reading to learn what a mortgage is, along with how to get yours started.
What Is a Mortgage?
A mortgage is a loan that you can take out from a bank or reliable lender to buy a home if you don’t have the money upfront. This agreement states that you’re willing to pay this money over time, along with an interest rate. It’s crucial you’re able to pay this loan off because if you fail to do so, the lender has the power to repossess your property and start the foreclosure process. Discussing with a professional ahead of time is recommended to estimate how much money you’ll be borrowing and how long it will take to fully pay it back.
When you take out a mortgage loan, it tends to begin with the pre-approval process. If you’re planning on looking for a home, you should start this process ahead of time so you don’t find yourself looking for property outside of your budget. Getting pre-approved means sitting down with your lender and calculating how much money they are willing to give you, as well as what the interest rate will be for your payments. When your lender has looked at your financial information, like credit scores and debt-to-income ratios, to ensure you are qualified for a loan, they will provide you with a pre-approval letter that shows agents and sellers that you’re qualified.
Once you’ve finally been pre-approved, it’s time to start your search for a new home. During this time, find a real estate agent to show you available properties in the area of your interest and work on negotiating a price. Make sure you find a home that fits your preferences and needs and don’t be afraid to ask your agent to show you more if you aren’t totally satisfied. If you make an offer that the seller accepts, you can move to the next step of the process which includes applying for your mortgage.
Applying usually means you’ll have to provide documentation similar to the ones you had during the pre-approval process. Some things you may need to include are employment and income information, as well as credit history and assets. Once your lender has taken the time to look these over, they can give you a rundown on your mortgage regarding how much you’ll be paying, usually monthly, in the form of a loan estimate. Lastly, at a closing meeting, you’ll finalize your loan and have the chance to ask any last-minute questions or voice concerns. By the end of this meeting, you’ll be able to leave with a smile and the keys to your new home!
Types Of Mortgages
Now that you have a better understanding of what the process is like and what a loan is, you should know the difference between your options. Lenders like Dee Ayers provide multiple choices and offer help every step of the way, whether you’re an old timer or first timer. These are some common types you should keep in mind.
1. Conventional Loans
These loans are the most common type and are not backed up or secured by a government agency. Instead, these tend to be secured by a private lender and have a minimum down payment of 3-5% with more lenient appraisal guidelines. Within conventional loans, there are conforming and non-conforming loans which each have their differences. Conforming loans have a fixed maximum payment amount that’s been set by the government, while non-conforming loans vary depending on your lender.
2. FHA Loans
These Federal Housing Administration (FHA) loans are known for their low down payments and closing costs, as well as their easy credit qualifications. They tend to have strict appraisal guidelines, especially when it comes to the health and safety of their clients. With mortgage insurance you must pay monthly and, like Conventional loans, FHA loans usually close in 25 days.
3. USDA Loans
Backed by the U.S. Department of Agriculture, these loans offer assistance to first-time homebuyers in rural areas. While they are not exclusively for first-timers, USDA loans are beneficial especially to them because they generally don’t have down payment requirements. Within this kind, there are 3 different mortgage programs including direct loans, loan guarantees, and home improvement loans.
4. VA Loans
Strictly for those who have served in the military, VA loans offer 100% of your purchase price to be financed and no monthly mortgage insurance payments. They have easier credit requirements which make them non-conforming loans, as well as interest rates that are lower than any other loans. This mortgage loan is a great benefit for veterans and your lender will help you through the process.
How We Can Help
At Dee Ayers, we value our clients and have a reliable team that will make this journey feel easy and smooth. Mortgages can be confusing and you’ll more than likely have questions that we’re qualified and ready to answer. Whether you’re looking to purchase your first home or refinance, Dee Ayers can help you find the right loan to fit your needs. Contact us to learn more about our options and start your journey on the right track.