MORTGAGE INFORMATION

Learn the basics, access the calculators and when you are comfortable, contact me and we can put you in touch with one of our preferred lenders. It's the first step in finding your new home. 

 

Selecting the type of mortgage that will best suit your needs is not a simple undertaking. The right mortgage will depend on many different factors, including your financial situation and how you expect it to change in the future, how long you’d like to keep your house, and how comfortable you are with the possibility of your mortgage payment changing.

For example, a 15-year fixed-rate mortgage can save you thousands of dollars in interest payments over the entire term of the loan, but your monthly payments will be greater. With an adjustable-rate mortgage, you may start with a lower monthly payment than a fixed-rate mortgage — but your payments could increase when the interest rate changes.

The best way to find the right mortgage for you is to discuss your finances, plans and preferences with a mortgage professional whom you trust.  If you are looking for a referral, I can help!

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MORTGAGE QUALIFYING

Approved vs. Qualified

According to the National Association of REALTORS® (NAR), nearly nine out of 10 buyers finance their purchase, which means that virtually all buyers require a loan.

The real issue with real estate financing is not getting a loan (virtually anyone willing to pay lofty interest rates can find a mortgage). Instead, the idea is to get the loan that’s right for you — the mortgage with the lowest cost and best terms. That’s why we suggest that consumers start the mortgage process well before bidding on a home.

What is “Pre-qualification”?

Pre-qualification is an estimate of borrowing power. It is a statement from your lender saying “based on your income, credit, & debt levels” you are qualified for a mortgage for “x” amount of dollars. This can be accomplished by a simple phone call to a lender. They should also run a credit report.

A pre-qualification is a determination on whether the prospective loan applicant would likely qualify for credit under a lender’s programs and standards, or a determination on the amount of credit the prospective applicant would likely qualify.

What is “Pre-approval”?

“Pre-approval” is likely to be a more formal process. Here you have actually completed the application with the lender, possibly supplied them with your income information, bank statements, W2’s, etc. The lender has asked about your employment & also runs a credit report. This is a more complete process. The lender should have run the application through an automated underwriting process.

Also a pre-approval, helps take the guesswork out of buying. In other words with a pre-approval you are closer to getting a mortgage commitment than with a pre-qualification. In the eyes of a seller, you are therefore a “stronger buyer” than the pre-qualification buyer. This is also more helpful in negotiating a better deal for you & makes you feel more comfortable with understanding the process & how it works.

Neither a “pre-approval” nor a “pre-qualification” are seen as absolute loan commitments. Lenders still need to look at property appraisals, verify information, and in many cases, re-check credit before agreeing to make a loan.

If a pre-approval or pre-qualification is less than a full loan commitment, why should buyers bother?

Here’s why:

By speaking with a lender you can get an informed idea of how much you can afford which homes are in your price range, and which loan programs might be best for you. Also, you will learn how much cash you will need to close the deal. It’s all a very important part of the real estate process. It also helps demonstrate you are a serious & motivated buyer.