There are more mortgage options available today than at any other time in history. This wide variety in housing loans makes it much easier than ever before for people to obtain the financing they require to fulfill their dreams of home ownership.
To help you better understand the what, why and where of Mortgages, here are answers to some of the most frequently asked questions:
What is a Mortgage?
A Mortgage is basically a loan to purchase your new home. As any loan it comes with terms of repayment and a specific interest rate for the length of the loan. The longer the term and the larger the down payment, the smaller your monthly payments will be.
What is the Interest Rate?
The interest rate is important as it determines the amount of money the loan will cost you over the length of its term. The amount of the down payment will influence the interest rate that you pay, generally the larger the down payment, the lower the interest rate.
Mortgage loans vary and may have interest rates that stay fixed for the life of the loan, or they may change as in an adjustable-rate mortgages(ARM), or they may be convertible mortgages, a combination of fixed and variable rates.
The initial rate of an ARM is generally lower than the rate available on a fixed-rate mortgage; but the rate will probably change during the lifetime of the loan.
How do I know if I can afford a particular home?
By speaking with one of SH Communities’ preferred lenders you can get pre-qualified for a loan. In doing this you will receive an unofficial estimate of the home you can reasonably afford to buy.
You also have the option to get pre-approved for a mortgage loan. Getting pre-approved means that a lending institution has processed your loan application and approved a specific mortgage amount.
What is the Application Process?
The mortgage application process is a series questions asked by a lender to determine your ability to qualify for a home loan. The lender will require basic information from you, inclusive of your full name, current address, Social Security Number, employment and asset information, and property address of the home you want to purchase. Additionally, the lender will order a credit report for each borrower on the loan application.
What is a normal Mortgage Application Checklist?
The following checklist indicates the items you will probably need to provide your lender with when you apply for a home loan.
- Social Security Number
- Date of Birth
- Paycheck - Most recent pay stub that shows year-to-date earnings.
- W-2 Tax Forms - Original copies sent to you by the Internal Revenue Service for the past two years.
- Employer Information - Names, addresses, and telephone numbers of employers for the past two years.
- Agreement to Purchase - A signed copy and any amendments,
the legal description of the property, and receipts for your down
The lender will need all this documentation to help gauge your willingness and ability to repay the mortgage.
At some point in the process, you may be requested to complete a Uniform Residential Loan Application. Some lenders prefer to complete the loan application face-to-face, and some do it online or by phone.
Other lenders may prefer to receive your loan application prior to the initial loan interview so they can be better prepared to assist you.
What are Loan Ratios?
When looking at your projected mortgage payment and existing debt, lenders might use ratios such as "28 and 36" to determine whether or not you qualify for a certain loan. In the case of "28 and 36," the 28 refers to the percentage of your gross income (before taxes) that may be spent on housing expenses, including principal and interest on the mortgage, real estate taxes, and insurance.
The 36 refers to the income that may be spent for payments on all your debts (including the mortgage). The monthly payments on your outstanding debts, when added to the monthly housing expenses, may not exceed 36 percent of your gross income.
When you talk to the lender, you should find out what ratios will be used to evaluate your application.
SH Communities’ Preferred Lenders inform you within 15 days if you’ve qualified for the mortgage. They will continue to work with you while your home is being built and just prior to closing give you all the information you will need.