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Home Mortgage Information
Buying a home is an exciting and stressful time. Being a homeowner is self-gratifying, creating a sense of pride and accomplishment. Whether buying your first or second home, it is important to understand how home mortgages work. In most cases, working with a qualified real estate agent and top lender will provide you peace of mind. However, as the buyer, you should know as much as you can too. This gives you even more power in the decision-making process and will often save you money.

To begin, when you find a home that you are interested in buying, you will need to put down what is called Earnest money that is saved in an escrow account. Once that is complete, you will be asked to fill out a loan application. The lender will look at various factors such as property value, your current income, savings, amount of down payment, and credit history. If you want to have the upper hand in buying a house, you should become pre-approved before you even start looking for a house. This means that the loan is approved and money is waiting. Now all you have to do is find the house of your dreams.

When you apply for the loan, by being organized, the entire progress will go smoother and easier. Certain documentation is required that you could start putting together in preparation for the loan. This will give you a jumpstart on the process and make things much more enjoyable. These items include:
  • W2 forms for the past three years
  • Pay stubs for the past year
  • Social Security number
  • Bank statements for the past year (both checking and savings)
  • Tax returns for the past three years
  • Information on any investments such as stocks, bonds, 401K, IRA, life insurance
  • Automobile information and amount remaining on loan with payoff date
  • Gift letters
  • Renter - Name, address, and phone number of your landlord
  • Renter - Letter confirming solid payment history (length of time as a renter, monthly payment, on-time payment)
  • Self-employed - Profit and Loss statement
  • Student Diploma or transcripts
After your application is completed and submitted, you can start the home search. If you were being pre-approved, you would not look at homes yet but wait until the approval is in hand before you house shop. After putting an offer on the house and it being accepted, the lender will start the verification process to check all of your information. Within three days of the application being submitted, you will need to complete a Truth in Lending disclosure.

At that point, your credit report will be run, payment histories checked, and the home you are interested in buying will go through the appraisal process. After all the inquiries come back into the lender, your entire loan package will go to the underwriters for approval or denial. If you plan to use less than a 20% down payment on a conventional loan, you will be required to submit a private mortgage insurance application, or PMI. When word comes that your loan has been approved, a pre-closing date will be scheduled. At this time, your title insurance will be ordered and your actual closing will be scheduled. During the closing, certain closing fees such as credit report, administrative fees, title search, appraisal fee, points, and so on will have to be paid.

As you work with the lender, based on the home, your financial situation, credit history, amount of down payment available, etc., you will guided to the type of loan best for you. For example, a conventional loan is one not insured by the Federal government. For this type of loan, you would need 20% down. FHA, which stands for Federal Housing Administration is insured by the Federal Housing Administration and is a government loan. Down payments will vary depending on special programs available and will run from 3% to 10%. Finally, a VA loan, or Veterans Administration, is a government agency that guarantees mortgage loans for qualified veterans. For this type of loan, no down payment is required.

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