Purchasing your dream home shouldn’t be complicated, but with all the mortgage types, acronyms, documents required, and multitude of numbers thrown at you, it can get a little confusing! We connected with our loan experts at loanDepot, Kelly Crowther and Richard Hedrick, to help give some insights and advice for simplifying the mortgage process.
A mortgage is a debt instrument, secured by real estate as collateral. As a borrower you are obligated to pay back the mortgage, or “loan”, with a predetermined set number of payments. Put more simply, a mortgage is a type of loan that you can use to buy or refinance real estate. Mortgages are a critical piece of the equation given that many/most people are unable to pay cash.
There are many different kinds of mortgages. Some are designed for first time buyers, others for buyers looking for their custom dream home, and some for investors looking to find wealth-generating opportunities in real estate. Conventional loans are the most common and offer many options including low down payments. FHA loans include more flexible options or features that conventional loans do not include. VA loans are offered exclusively to our military veterans and JUMBO loans are for more expensive properties that do not fit into the other product options. This is not an all-inclusive list but covers the vast majority of product options.
This is a great question and includes many things to consider. From your perspective you likely have a good sense of the monthly payment you are comfortable with — this is important to consider early. From the lender’s perspective, we consider your payment relative to your income. Keep in mind that the total payment should include Principal and Interest (P&I/mortgage payment), Real Estate Taxes (they can vary based on the property and amenities), Homeowners Insurance (protecting you against unforeseen damages or liability) and finally the Homeowners Association (which may or may not apply based on the property you buy). With the total payment in mind and an understanding of how much money you have available for a down payment, we can determine your loan amount and the approximate price of the property you can afford.
Typically, mortgages are 30-year loans, but you can pay off the mortgage early without penalty. The rate is determined by the current market and is readily found online or by consulting a mortgage professional. The best advice is to seek out a referral to a trusted mortgage professional that can act as your guide to the best options available to you.
Depending on your qualifications, you could be eligible for programs that include a grant or down payment assistance allowing you to purchase your first home without a down payment. Don’t forget though, there are closing costs to be paid as well. If you do have savings, this can allow you to purchase more property or reduce your mortgage payment. Again, seek out a trusted mortgage professional to begin exploring the best options for you.
Begin exploring your options early. Review your credit, know what you are comfortable with (not just what a lender says you qualify for), and seek a referral to a trusted mortgage professional to guide you through your options. This should be at NO cost to you.
Any other information you want to provide that would be helpful to individuals new to the homebuying/mortgage process?
Know your options, work with referred real estate and mortgage professionals, and take charge of the process. This is a project that might be challenging, but will prove to be a valuable part of your life, savings, and retirement.
Buying a new home doesn’t need to be complicated. Find your dream home with Brookfield Residential and follow the guidance of the loan experts at loanDepot and you’re sure to have an easy home-buying experience!
*This blog was created in collaboration with loanDepot NMLS 174457, a United States based mortgage company.