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.

What is a mortgage?

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.

What is the step-by-step process of getting a mortgage?

1. Seek out a mortgage professional that is willing to begin your journey early, don’t wait until you have found the house. The right mortgage professional will guide you through all scenarios so you don’t have to reinvent the wheel. This is CRITICAL. The best mortgage professional will gather enough information to counsel you on your available options.
2. Define your goals. Determine your budget and create a list of “needs” and “wants” that you can use to help you find the home of your dreams.
3. Choose the loan that’s right for you. Your mortgage professional should guide you to determine what type of loan (fixed-rate, adjustable-rate, JUMBO, or government) that’s perfect for your situation.
4. Get approved. Your mortgage professional will help to coordinate with all the necessary parties to ensure your loan is submitted properly to the underwriter for approval.
5. Organize and submit your documents. You may need to provide items such as pay stubs, credit information, mortgage statements, employment history, etc.
6. Close your loan. Upon approval, we will schedule your loan closing appointment and you can begin the process of moving into your dream home.

What are the different types of mortgages?

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.

How is my borrowing amount determined and how do I qualify?

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.

How long do I have to pay back my loan and at what rate?

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.

How much do I have to put down for my mortgage?

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.

Any tips for first time homebuyers when embarking on the journey of homeownership?

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!