|Get Pre-approvedGetting pre-approved before you apply for a loan can help you understand how much you can borrow.When buying a home, you may be pre-qualified or pre-approved. Pre-qualification is not as useful as pre-approval. Pre-approval can be done over the phone or in person. It requires a more rigorous process, including verification of your credit, income, assets and liabilities. It is highly recommended that you be pre-approved before you start looking for a home. Being pre-approved will: |
- Inform you of your maximum affordable home value, and save you from previewing properties outside your price range.
- Put you in a stronger negotiating position with the seller, because the seller will know your loan is pre-approved.
- Help you close quickly, since your loan is pre-approved.
Compare Loan ProgramsWhat loan program is best for your situation? Lenders offer many different loan options:
To improve your chances of getting a loan approval:
- Think about how long you plan to keep the loan. If you plan to sell your home in a few years, you may want to consider an adjustable rate or balloon loan. If you plan to keep your home for a longer time, you may want to consider a fixed rate loan.
- Compare different loan programs. With so many programs to choose from, it's hard to figure out which program is best for you. Consult an experienced loan officer who can help you find a loan program that best fits your short- and long-term plans.
- Respond promptly to any requests for additional documents. This is especially critical if your rate is locked or if you plan to close by a certain date.
- Do not make any major purchases. Do not buy a car, furniture or another house till your loan is closed.
- Anything that causes your debts to increase might have an adverse affect on your current application.
- Do not move money into your bank accounts unless it can be traced. If you are receiving money from friends, family or other relatives, please contact us.
- Do not go out of town around the closing date. If you do plan to be out of town when your loan is expected to close, you may sign a power of attorney, to authorize another individual to sign on your behalf.
- Notify your loan officer before applying for any other credit, including credit cards, personal loans or even with another mortgage company. Some loan programs have strict guidelines regarding your credit score. Credit inquiries may lower your credit score and may have an adverse affect on your loan approval.
Required Documentation A properly documented loan application makes your loan process go smoothly. This checklist will help you gather your paperwork.
- Complete and sign the residential loan application, Form 1003, and the attached loan info sheet, credit authorization and fair lending notice.
- If you are salaried: provide W-2's for the previous two years and one month of paystubs. If you are self-employed, provide tax returns for the previous two years, including all schedules, and a YTD profit and loss statement. (Note: provide copies of all requested documents. Do not provide original documents.)
- If you own rental property, provide recent rental agreements and tax returns for the previous two years, including all schedules.
- To speed up the approval process, provide bank statements for the most recent three months, and recent statements for stock, mutual funds and IRA/401K accounts.
- If applicable, provide a copy of your divorce decree and settlement agreement.
- If you are NOT a US citizen, provide a copy of your green card (front & back). If you are NOT a permanent resident provide a copy of your H-1 or L-1 visa.
- If any borrower has filed bankruptcy, provide the Discharge Notice, Filing and Schedule of Creditors.
- If you are applying for a home equity line of credit or loan (second loan), also include your first mortgage note. (This should be with your closing loan documents.)
Close the Loan After your loan is approved, you will be required to sign the final loan documents. This will normally take place in the presence of a notary public. Be prepared to:
Your loan will normally close shortly after you have signed the loan documents. On refinance and home equity loan transactions, federal law requires that you have three days to review the documents before your loan transaction can close. Purchase transactions do not have a three day rescission period.
- Bring a cashiers check for your down payment and closing costs if required. Personal checks are normally NOT accepted.
- Review the final loan documents. Make sure that the interest rate and loan terms are what you were promised. Also, verify the accuracy of the name and address on the loan documents.
- Sign the loan documents. The notary will require that you have your picture ID with you. Some lenders also require to see your Social Security card.
Loan Programs – Which loan is right for me?
Years you plan to stay in the home
|1-3 years||3/1 ARM, 1 year ARM or 6 month ARM|
|3-5 years||5/1 ARM|
|5-7 years||7/1 ARM|
|7-10 years||10/1 ARM, 30 year fixed or 15 year fixed|
|10+ years||30 year fixed or 15 year fixed|
|Fixed Rate Mortgages |
- 30 year fixed
- 15 year fixed
- Monthly payments are fixed over the life of the loan
- Interest rate does not change
- Protected if rates go up
- Can refinance if rates go down
- Higher interest rate
- Higher mortgage payments
- Rate does not drop if interest rates improve
|Adjustable Rate Mortgages (ARM)10/1 ARM, 7/1 ARM, 5/1 ARM, etc.|
- Lower initial monthly payment
- Rates and payments may go down if rates improve
- May qualify for higher loan amounts
- 30 year term, no balloon payment
- More risk
- Payments may change over time
- Potential for higher payments if rates increase
|First Time Buyer Programs|
- Lower down payment
- Easier to qualify
- Lower rates may be available
- May be subject to income and property value limitations
- Some government subsidized programs may generate a recapture tax if you sell the house too soon
- Education courses may be required to qualify for these loans
|Stated Income Programs|
- Don't need to verify income
- Faster approval
- Good for borrowers who may not qualify with a full income documentation program
- Higher rates
- Higher down payment
|Interest Only Programs|
- You have several payment options
- Lower monthly payments
- Qualify for a higher loan amount
- Qualify at the interest only payment
- Option to pay the full normal payment
- Interest only payments for up to ten years
- Higher rates
- Principal loan balance will not decrease during the interest only payment period
- Payment will be higher for the remaining term
|Home Equity Line of Credit|
- You only borrow what you need
- Pay interest only on what you borrow
- Flexible access to funds
- Interest may be tax deductible
- May be free of closing costs
- A good source for an emergency fund, if set up in advance
- Can be used for debt consolidation and lower payments
- Rates are usually lower than consumer loan or credit card rates
- Rates can change. The maximum interest rate can be relatively high
- Payments can change
- Harder to refinance your first mortgage
|Home Equity Fixed Loan|
- Fixed payments
- Interest may be tax deductible
- Get cash out for any purpose
- Higher interest rates compared to first mortgage
- Harder to refinance your first mortgage
- Interest is paid on the entire loan amount, compared to an equity line of credit
In addition to our standard loan programs, you may benefit by obtaining one of our many special programs:
- Purchase your home with no down payment.
- Piggyback loans: 80-10-10 or 80-15-5. Avoid PMI payments.
- Low income – Alternative credit programs
- Debt consolidation programs.
- Home Improvement loans.
- You may qualify even if you've been turned down before!
For more information please contact Todd Hughey, Senior Loan Officer at 1st Mariner MortgageOffice: 781-474-5110 Cell: 617-669-3322 Fax: 781-726-7291Email firstname.lastname@example.org Website: http://www.hugheyloan.com/
The decision to buy a home can be one of the most valuable and important investments one can make. Therefore it is important that you are familiar with the mortgage process so that you can wisely finance your home. Essentially, a mortgage is just a loan that is used to finance the purchase of property. The property itself is used as security to ensure repayment until you have repaid the entire amount plus interest.
There are many types of mortgages on the market and finding the right one can be an overwhelming project. The best approach is to divide the process into manageable tasks. Sit down with a mortgage professional and examine the advantages and disadvantages of all available options to determine which product is best suited to your current situation and future plans.
How to Find the Right Mortgage
- Estimate how long you expect to live in the house. If the answer is less than three to five years, consider an Adjustable Rate Mortgage (ARM), which typically starts out with a lower rate. If you plan to live in your new home longer than five years, a fixed-rate mortgage offers protection against rising interest rates.
- Shop around for mortgage rates. Banks, credit unions, and mortgage companies all offer mortgages. Compare at least six lenders in your area.
- Add up all the costs for each lender. Include fees, points, closing costs, etc., to arrive at the total mortgage cost for each lender.
- Amortization Period: The period of time after which, if all monthly payments are made on time and in full, the loan will be paid out.
- Down Payment: The amount of money provided by you, the purchaser toward the price of the property (not including legal fees or other acquisition costs).
- Interest Rate: The actual cost of borrowing money, charged as a percentage of the outstanding amount owed. Usually compounded on a monthly basis.
- Mortgage Amount: The total amount of money to be borrowed by you, the purchaser, and applied toward the price of the property.
- Prepayment Privileges: The right of the borrower to pay out all or part of the outstanding principal before it comes due.
- Term of the Mortgage: The period of time during which the loan contract is active. During this period, you the Borrower makes periodic payments (usually monthly) to the lender and at the end of the term the balance of the loan becomes due and payable.