For a lot of people, buying a home is one of their biggest dreams and it's not just an experience that is emotionally hard, but also fulfilling, and if done correctly, it can be a very wise financial decision too. Getting a house is also a financial obligation to make monthly payments to the entity that is borrowing you the money, meaning you need to ensure you are in fact not borrowing more money than you can pay back given your different financial obligations. Your kids will inherit the property, but most importantly, it needs to be the place where you can see yourself living for a long period of time. That is why we created an article on how to get a mortgage. You can obviously make different upgrades to your home as well as remodel it, but it is still a good idea if you start out with a house that you like a lot. A lot of these upgrades aren't possible if you're simply renting a house. If you're intelligent in the process of buying a home, it can be a means to increasing your personal net worth, and you can also increase the value of the home too. Getting a better understanding of what a mortgage is and why you need one will help you in the process. Getting a mortgage means that you're getting a loan from either a bank, financial institution or a different type of lender. The money being loaned to you is then used to get that house you want so dearly, since most people do not have the type of money available that it takes to buy a house. When buying the house, you'll get the legal ownership over the house since the title is transferred to you once the transaction is done. The loan you get is then secured against your newly acquired asset, meaning if you're not paying your monthly amounts, the lender has the legal possibility to take ownership of the house. You will need to pay back the borrowed money according to the agreements that you have with the bank and the mortgage is simply a way to compensate for the fact that most people do not have the full amount the house costs available. You will traditionally need to pay a down payment, though, which is money that you have saved up over time. Usually this is somewhere between 3.5-20% of the full amount that you need to pay. Generally, the higher the interest that you choose to pay, the better conditions you will also be able to obtain on your mortgage, meaning a lower interest rate. There are also different types of loans you can get, which all will affect how you will end up paying back the money, and there may be other fees that you need to pay for also when you make your monthly payments, like PMI or Private Mortgage Insurance. Here are all the topics this article will cover.
- How Does a Mortgage Work?
- Process of Obtaining a Mortgage
- Different Types of Home Loans
- Costs of Getting a Mortgage
- How Much Mortgage Do I Qualify for?
- What is a Mortgage Amortization Table?
- How to Get Pre-Approved for a Mortgage
- How to Get a Mortgage Loan with Bad Credit
- How to Shop for and Choose a Mortgage Lender
- How Long Does it Take to Pay Off My Mortgage?
- How is the Mortgage Interest Calculated?
- How Much of My Mortgage Payment is Interest?
- How Much Mortgage Interest Can I Deduct?
- How do Mortgage Points Work?
- How much is a Mortgage on a $200,000 House?
- How Does a Second Mortgage Work?
- How Often Can You Refinance Your Mortgage?
- How to Avoid Mortgage Insurance
- How Fast Can I Pay Off My Mortgage?
- Applying for the loan
- Processing the loan
- Approval by the underwriter
- Closing on the loan
How Long Does Mortgage Underwriting Take?Traditionally, as we mentioned, this is a process that should take up to 3 days and generally not more. a lot of speculation that they will. If you want to bet that interest won't increase, you can consider the variable-rate. With a fixed-rate loan, the interest rate is either fixed for part of the loan or its entire length, giving you more security that your mortgage payments won't suddenly end up increasing. A government-insured is yet another option you need to familiarize yourself with, and as the name says, they're insured by a government entity which is commonly either the FHA (thereby the name, FHA mortgage loan). It's advantageous for people that haven't saved up a lot of money since you are able to pay no more than 3.5% down payment with this option. With the loan being insured by the government, the process of getting it can often be easier, assuming you are eligible to get this in the first place. VA mortgages are a different type of mortgage under the U.S. Department of veterans. You probably already guessed that military affiliations is required to be eligible. You may not even need to pay any down payment with this type. USDA which stands for the United State Department of Agriculture also insures loans in rural areas, although they are only available if you are earning less than a certain amount of money, which depends on where you live.
Fixed-Rate Mortgages Pros and ConsWe already mentioned that the certainty you get with this type is an advantage, but there's another advantage to, which is that you will more easily be able to calculate all your payments and you can therefore more easily budget with this type, and there's not the same uncertainty associated. While you can remortgage your home, a variable-rate will automatically give you a lower rate assuming the rate drops, so if you're on a fixed-rate when the rate drops, that's a disadvantage.
Variable-Rate Mortgage Pros and ConsThe pros and cons are the opposite of what the case is with the fixed-rate, and the first 3 or 5 years generally has a lower interest too. If you are planning on selling the home soon anyway, this could be a better option. When you consider this option, be sure to consider the different scenarios where the rate changes different amounts and be sure you'll be able to pay them when that's the case. At worst, you might be forced out of the house as a consequence which wouldn't be fun.
- Down payment
- Closing costs
- Monthly amortization
What is PITI in Relation to a Mortgage?PITI is another name for principal, interest, taxes and insurance. This is everything you will end up finding in the amortization table, and you will often be asked to provide proof that you have 2 months of PITI in case your main income source disappears so as to ensure you'll be able to keep paying.
- The importance of your credit score
- Gather all information on your income
- Asset information
- Personal information
How Long Does a Mortgage Pre-Approval Take to Get and How Long Does it Last?Assuming you are able to gather all the documents, it shouldn't take long to get the pre-approval, which could be as fast as one hour, although it is more common for it to be about a day. You can even apply to get pre-approved several different places too, although you may not want to get too many either, since it could look like you're trying to get a lot of new loans at once. When you have been issued a pre-approval, it is commonly valid for 90 days, although it depends on who issues it.
- Do everything you can to fix your bad credit.
- Bills should be paid on time
- Some types of loans are easier for people with bad scores.
- The interest rate they offer you is very important.
- Prepare questions to ask
- Ask them to provide you with advice.