A Simple Primer on Home Mortgage Loans
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by: marciafreeman
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There is a lot of money at stake when applying for a home mortgage loan. The reality, and the process, can be overwhelming for the first time home buyer, and the rules of the game are being more strictly enforced in light of the home mortgage market meltdown of 2008 and 2009.
If you plan to apply for a home mortgage loan in the near future, you must prepare by maintaining a high credit score, reducing your overall debt and saving as much of your income as you can. The more money you have for a down payment and closing costs, the better off you will be. High credit scores qualify borrowers for a lower monthly home mortgage payment, and reducing debt will not only raise the credit score but also improve your debt to income ratio. A low debt to income ratio increases your chances of being approved for a home mortgage loan.
Do your homework on the various home mortgage loan products before jumping in. So many homeowners who found themselves in or close to foreclosure in recent years are in that position because they did not take the time to understand the terms of the loan they took out. Spend the extra minutes to educate yourself on the differences between fixed and adjustable rate home mortgage loans. And do stay within your financial means. A lender will present you with the amount of the loan you qualify for, which usually is an amount higher than that which you can reasonable afford. Go into your meeting with your lender prepared with a figure that you can live with and do not let yourself be seduced by a higher qualifying amount.
The home mortgage loan approval process is pretty straightforward and includes the following stages: prequalification, application, document review, appraisal, and approval. The lender will informally review your financial situation to determine whether and how much of a home mortgage loan you prequalify for. If you pass this first stage, you progress next to the formal application stage in which you select your home mortgage product, complete a written application, and lock in your interest rate. Next the lender will perform a review of underlying documentation such as your credit report and employment verification. When all is in order to lender satisfaction, it will hire a property appraiser to verify that the property value supports the purchase price. Once the appraisal process is complete, and assuming the property is worth the purchase price, the mortgage is approved and closing is scheduled.
The home mortgage process can go quite smoothly with proper preparation. You could be a homeowner before you know it.
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