Mortgages can be confusing with so many products to choose from, but it’s important to understand your options. Knowing the answers to your mortgage questions will help you to make the right decision, whether you’re buying your first home or refinancing your current mortgage, we are here to help you.
The idea of meeting with a Loan Officer can be intimidating, especially if you’re buying your first home. This is probably the biggest purchase you’ll ever make and you will have a lot of questions.
Your first meeting with your Loan Officer will be very simple, they will ask questions about your finances, what type of home you would like to purchase, how much of a down payment you will have, when you would like to purchase and so forth.
Once you begin your loan application the Loan Officer will ask for common documents such as:
At Liberty Bank for Savings, our Loan Officers will explain all your options to you and help you select the loan type that best fits your needs.
If you’ve paid off all your debt (and it’s a good practice to do so before buying a home) it is possible you won’t have a credit score when you meet with a Loan Officer. That might make you nervous. But don’t worry; you can still get a mortgage.
If you apply for a mortgage without a credit score, you may need to provide additional paperwork for the underwriter to review.
A quick conversation with your Loan Officer about your income, assets and down payment is all it takes to get prequalified. But if you want to get preapproved, your Loan Officer will need to verify your financial information and submit your loan for preliminary underwriting. A preapproval takes a little more time and documentation, but it also carries a lot more weight when you are shopping for a home.
Prequalification helps you understand how much you can borrow, a preapproval tells a homebuyer you already have started the loan process and the bank has preapproved you up to a certain loan amount so they know you are more likely to get a loan than another prospect that might not have started the process.
Buying “too much house” can quickly turn your home into a liability instead of an asset. That’s why it’s important to know what you can afford before you ever start looking at homes with your real estate agent.
The rule of thumb is keeping your monthly mortgage payment under 28% of your pre-tax monthly income. For example, if your monthly pretax income is 5,000 a month, your monthly mortgage payment should be no more than $1,400.
With a conservative monthly mortgage payment, you’ll have room in your budget to cover additional costs of homeownership, such as repairs and maintenance, while saving for other financial goals, including retirement.
Our recommended down payment is 20%, this eliminates the need for you to pay private mortgage insurance (PMI). PMI is an extra cost added to your monthly payment that doesn’t go toward paying off your mortgage. With a large down payment you will have equity in your home, and your monthly payment will be less.
With so many mortgage options out there, this is the time to talk to a Loan Officer and have them explain your options and let you know which mortgage loan is the best for you.
High interest rates bring higher monthly payments and increase the overall interest you’ll pay over the life of your loan. A low interest rate saves you money in both the short and long term.
Of course, just like you can’t time the stock market, it’s nearly impossible to time your home purchase with the best interest rates. The past few years have held some of the most affordable interest rates we have ever seen.
Because mortgage interest rates can change day to day, locking your rate is an important part of the mortgage process. Locking your interest rate guarantees a certain interest rate for a specific period of time, usually between 30 and 60 days.
In most cases, you can lock your interest rate as soon as your initial loan is approved. However, most buyers wait until they have found a specific home to purchase and are officially under contract.
Mortgage interest rates go up and down and there’s no way to time it perfectly. You simply don’t know what the future holds. No one does. So don’t spend time trying to time the market; instead, rely on your Loan Officer’s expertise. If they say it’s a good time to lock down your rate, trust them.
The typical monthly mortgage payment includes:
Your mortgage payment may include additional costs such as your homeowner’s insurance and property taxes. These are annual expenses that are part of homeownership, and the Bank is at risk if you don’t make those payments.
Your Loan Officer can add the monthly portion of each of those accounts to your mortgage payment. That money is held in an escrow account that is managed by the Bank to make sure those costs are paid on time.
You should definitely think about refinancing if:
The average time to close on a house is currently around 60 days. Factors such as your loan type, your financial situation, and the length of your contract can either lengthen or shorten that time frame.
When you close, that new house and mortgage are officially yours. At the closing, you’ll sit down with the professionals involved in your real estate transaction and sign all the legal documents needed to give you ownership of your new place. That’s pretty exciting!
You’ll also be responsible for paying closing costs as part of the closing process. You’ll receive a Closing Disclosure three days before closing so you know exactly what you can expect.
If you have questions about the closing process, talk to your Loan Officer.