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Mortgage Resources

What is a Mortgage Loan?

A mortgage loan is money given to you by a financial institution to buy a house. It requires a contractual agreement that you’ll pay back the loan with interest in specified monthly payments over a stated period of time. You can choose your payment term- the longer the term, the lower the monthly payment, but you’ll pay more in total interest.

Where do I begin?

Your financial institution has a mortgage loan officer who can answer your questions, help you select the best financing for your needs, prepare estimates of your closing costs and down payment, calculate payment schedules, and help you determine what price home you can afford.

How do I prepare to apply for a Mortgage Loan?

Getting a mortgage loan is a big step so you’ll need to understand exactly what is involved. Make a list of any questions you have about the loan. Know the terms so you’ll be familiar with them when you meet with your loan officer.

How much home can I afford?

Generally, lenders want your monthly payment, including taxes and insurance, to be 25- 30% of your gross monthly income. Your loan officer can help you determine what price home to shop for by reviewing your income, debts and credit. You can also apply for a pre-approval where the lender approves the loan for 90 days before you find a new home. Pre-approval makes your offer more attractive to a seller.

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How do I apply for a Mortgage Loan?

When you have found a home, your loan officer will help you fill out a loan application and will tell you what information you’ll need to furnish. The most common items required are:

  • Photo ID and proof of Social Security number.
  • Residence addresses for past two years.
  • Names and addresses of each employer for past two years.
  • W-2’s and last two pay stubs.
  • Names, addresses, account numbers, and balances for all checking and savings accounts and the last two bank statements.
  • Last two year’s tax returns and year-to-date Profit & Loss prepared by an accountant.
  • Loan information and addresses on real estate owned.
  • If applying for a V.A. loan, you’ll need a Certificate of Eligibility or DD214’s.

When applying for a mortgage loan, money will be collected for a credit report and appraisal.

What happens after I apply for a Mortgage Loan?

After you have applied for a loan, the information you have supplied will be verified and a credit report on you completed. An appraisal will be performed on the home you are purchasing to determine its market value. When all the information is collected, it will be reviewed for loan approval.

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What should I know about closing Costs?

Closing costs are up-front fees you pay the lender when taking out a mortgage loan.

Adjustable Rate Mortgage (ARM)

Interest rate is tied to price of Treasury Bills and adjusts at specific periods. Rates are usually 2% lower than fixed rate mortgages during first year. Most ARMs cannot go up more than 2% per adjustment period or 6% for life of loan.

Annual Percentage Rate (APR)

Actual rate you pay for mortgage in long term, including interest, points, and certain closing costs.

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Appraisal

An official valuation of market value of a house. Have the house you want to buy appraised so you don’t pay more than it is worth.

Closing

Transfer of ownership of a house when you sign loan papers and deed is recorded.

Closing Costs

Up-front fees a lender charges.

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Credit Report

Report on how timely you pay your bills, debt you are carrying, and your current monthly payments. Credit history is important when a lender considers your loan application.

Fixed Rate Mortgage

Interest rate is locked in for life of loan, so future changes in interest rates won’t affect it.

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Home Owner’s Insurance

Hazard insurance and title insurance are required when getting a mortgage. Mortgage insurance also may be required.

Multiply the monthly payment times the number of thousands of dollars you are borrowing

Interest Rate 10 Yrs. 15 Yrs. 20 Yrs. 25 Yrs. 30 Yrs.
4.00 10.12 7.40 6.06 5.48 4.77
4.25 10.24 7.52 6.19 5.42 4.92
4.50 10.36 7.65 6.33 5.56 5.07
4.75 10.48 7.78 6.46 5.70 5.22
5.00 10.61 7.91 6.60 5.85 5.37
5.25 10.73 8.04 6.74 5.99 5.52
5.50 10.85 8.17 6.88 6.14 5.68
5.75 10.98 8.30 7.02 6.29 5.84
6.00 11.10 8.44 7.16 6.44 6.00
6.25 11.23 8.57 7.31 6.60 6.16
6.50 11.35 8.71 7.46 6.75 6.32
6.75 11.48 8.85 7.60 6.91 6.49
7.00 11.61 8.99 7.75 7.07 6.65
7.25 11.74 9.13 7.90 7.23 6.82
7.50 11.87 9.27 8.06 7.39 6.99
7.75 12.00 9.41 8.21 7.55 7.16

Monthly Payment
Principal + Interest
For $1,000.00 Loan

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How to Maintain a Good Credit Standing

  • Pay your bills promptly and be sure to pay at least the minimum amount required.
  • Use only one or two credit cards and always know approximately how much you owe on each card.
  • If you can’t make a payment on a bill, show your good faith by calling the lender to discuss the situation.

AnnualCreditReport.com

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How to Clear a Credit Standing

To determine if you are a good risk, the lender will look at your credit standing by obtaining a credit report. To clear past credit problems:

  • Get a copy of your credit report to identify problems. Go to annualcreditreport.com to obtain your FREE credit report.
  • Have proper documentation and good explanations of problems or disputes.
  • Go back to the credit company to correct any errors and provide explanations to future inquirers.

Common legitimate reasons for late payments include job layoff, illness and accounts placed for collection by health care providers.

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