Buying a new home should be one of the most exciting experiences of your life. However, before you can finalize the purchase, you will need a mortgage loan. Obtaining a mortgage can seem like such an overwhelming and complicated process. Therefore, you need to do your research online to discover what to expect. You are probably wondering how to apply for a mortgage. This article will explain how to apply for a mortgage, so you can make the process as easy as possible.
Understanding How to Apply for a Mortgage
A mortgage loan will give you the money you need to purchase a home. You will need to find a lender and go online to apply for the loan. Your home will be used as collateral to secure the loan. Therefore, if you do not make payments, your home could be seized. Most lenders allow you to get pre-approved online, so you will know exactly how much money you can spend on your new home. You can get started on the lender’s website.
Limits and Amounts
For most conventional loans, you cannot obtain a mortgage for more than $424,000. However, if you need more than that, jumbo loans are available for higher amounts. Since your mortgage is secured by your home, you do not want to get a loan for more than you can afford. Most lenders have a mortgage calculator that you can use. However, numerous calculators are found online. You can find one here.
To determine your payments, you will need to know the interest rate of the loan. The lender’s website can tell you how much money you will be paying interest. The amount of money your lender will give you will depend on your income and your credit score.
What Types of Mortgages Are There?
You will need to determine what kind of loan you want. Some of the options include:
• Fixed Rate Loans – With a fixed rate loan, your rate will not change throughout the life of the loan.
• Adjustable Rate Loan – You will begin with a certain rate. After a certain number of years, the rate could increase or decrease depending on the market.
• VA Loan – This loan is for people in the military or retired military. You do not need a down-payment. The closing costs are minimal.
• FHA Loan – This is probably the most popular type of loan. It is good for the first-time home buyers. The credit score requirements are more lenient. It requires a low down payment.
• Conventional Loan – This is a loan not backed by the Federal Government.
• USDA Loans – This loan if provided to rural property owners. It is backed by the department of agriculture.
• Jumbo Loans – This is an amount over $424,000. The credit requirements are pretty strict.
How to Apply for a Mortgage
Before you are ready to actually apply for a mortgage, you need to research lenders. See which one offers the best loan for your needs. You can then go to their website to begin the application process. If you want to know how to apply for a mortgage, the steps are as follows:
1. Complete the pre-application online to get pre-approved for the loan. Knowing how much money you can receive is important when searching for the right home. You will need to provide simple information such as your name and social security number. Also, they will ask you how much money you make, where you work, and how long you have been at your job. They will also ask you how much debt you have. They will also want to know bank account information.
2. Gather documents. During the pre-approval stage, they will probably ask you to submit some paperwork. Some of the documents you will need to submit include a photo id and a pay stub. You will also need 2 years or tax returns and your W2 forms. You will need to submit the last 2 months of bank statements.
3. Shop for a Home. Now that you have received pre-approval, you will know how much money you can spend on the home. Therefore, you can start looking. You do not need to waste your time on homes that you cannot afford.
4. Apply for the mortgage. You need to enter the property address, sales price, size of the home, and estimated real estate taxes. You will also need to list the type of mortgage you are requesting.
5. Loan estimate. You will receive papers within three days stating the estimated interest rate, monthly payment amount, and total closing cost. Subsequently, if you approve of these numbers, you can tell the lender that you wish to proceed with the loan.
6. Appraisal ordered. They will inspect your property and conduct an appraisal.
7. Loan goes to underwriting. The underwriters will have the final say on your loan approval.
8. Lock in your interest rate. Your interest rate will be on lock, and you cannot change it for a certain number of days.
9. Close your loan. Your documents are ready, but you have three days to look over them and change your mind if you wish. If you agree to the terms, your lender will set up a time and place to close the loan. You can then sign the papers and you will own your home.
During the application process, you can track the application process on the lender’s website.
How Does Repayment Work?
After you determine how to apply for a mortgage and receive approval, you will need to concentrate on making payments. You might have a 30-year term, or you might have a 15-year term. If you are paying your mortgage in 15 years, you will save money.
The amount you borrow from the lender is known as your principal. Part of the money you pay each month will go to paying your principal. Moreover, part of it will go to paying the interest and other fees. In some cases, part of your mortgage payment will go to paying taxes or private mortgage insurance. Your loan balance will be high at first, so you will owe more interest. As you pay down your principal, your interest amount will decrease. As your interest decreases, the process goes by the name of amortization.
FAQ We Know You Have
How can I make payments?
Most lenders will allow you to make payments on their website easily. You can also mail in a payment. So you do not forget your payment, lenders will allow you to set up automatic withdrawals from your checking account.
Can I make a larger payment than the normal amount?
You can apply some extra money to the principal of your loan if you wish.
Can I refinance my mortgage?
You can refinance your mortgage if it suits your needs. You might want to refinance for a lower interest rate, or you might want lower monthly payments.
Applying for a mortgage is not as complicated as you think. If you need to know how to apply for a mortgage, just go online and research your options. You will be able to enjoy the perks that come with owning your new home.