FAQs for Mortgages

When do I need to start looking for a mortgage?

• It is recommended that consumers start looking at mortgage programs well before they start looking at houses. The real issue is not getting a mortgage; it’s finding the right mortgage for you.

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Where do I look for a mortgage?

• Real estate lending is available from a variety of sources including mortgage bankers, credit unions, commercial banks, savings and loan associations, insurance companies, online companies and mortgage brokers. Each offers an assortment of mortgage programs for different needs. It is important to meet with lenders and look at the loan options to find a program that best suits your needs and how much you can afford.

How do I get a mortgage loan?

• Most mortgages can be done in 3 steps:
  
  • Examine your finances. Don’t forget to include income and expenses, both current and projected to determine what you can comfortably afford each month. Along with your mortgage payment, don't forget related insurance, taxes, homeowner association dues and any other costs rolled into the mortgage payment.
    
  • Shop for a loan. Along with loan costs, you’ll also have to consider other factors including the interest rate, broker fees, points (each point is 1% of the amount you borrow), prepayment penalties, the loan term, application fees, credit report fee, appraisal and a host of others.
    
  • A written mortgage application must be completed and submitted with supporting documentation. These documents may include recent pay stubs, rental checks, and tax returns. The loan officer will explain the type of records required during the preapproval process.
    

What is “preapproval”?

• This means that you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can qualify for a certain loan amount with one or more specific mortgage programs. It is NOT a final loan commitment.
  

Why would I want to get a preapproval?

• Purchase forms often require buyers to apply for financing within a certain period of time. By meeting with loan officers in advance and identifying the right mortgage program for you, it will not be necessary to rush to find a loan officer,  complete the necessary credit checks, and perhaps end up in a mortgage program that doesn’t meet your needs.
  

How do I get preapproval?

• The loan officer will review your financial situation including your credit report and other information. Based on this information, the loan officer will then suggest programs that best fit your situation.
  

Can I only have one preapproval?

• No, you may visit as many lenders as you would like, and get several preapprovals. However, keep in mind that each one carries a new credit check that will show up on your future credit reports.
  

What is a preapproval letter?

• This is a letter issued by the lender that can be shown to the listing agents. It demonstrates your financial strength and shows that you have the ability to go through with the real estate purchase.
  

What kind of mortgage should I get?

• There are thousands of mortgage programs available. In general, the mortgage you choose will most likely be determined by these factors:
• How much down?
• If less than 20%, do you have mortgage insurance?
• How’s your credit?
• Are you a first time homebuyer?
  

What is mortgage insurance?

• This is an insurance policy that protects the lender against some or most of the losses that can occur when a borrower defaults on the loan. It is usually included in the mortgage payment and is paid by the borrower. It is typically required when the down payment is less than 20% of the home purchase price.
  

Where do I get mortgage insurance?

• Most lenders have a list of preferred mortgage insurance companies. However it is never a bad idea to visit with different mortgage insurance companies to get several quotes.
  

Are there different types of mortgage insurance?

• Private Mortgage Insurance (PMI) refers to privately owned companies that offer standard and special mortgage insurance.
• Mortgage Insurance Premium (MIP)refers to a mortgage that is insured by the Federal Housing Administration. Essentially this is the government version of a PMI.
  

How long do I have to pay mortgage insurance?

• The Homeowners Protection Act of 1998 requires the PMI to be canceled when the amount owed reaches a certain level. The PMI can sometimes be cancelled earlier by submitting a new appraisal showing that the loan balance is less than 80% of the home’s value due to appreciation. This generally requires at least 2 years of on-time payments first.

Information provided by Realtor.com