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Home Mortgage Overview

When it comes to taking out a Mortgage you should always know your lender in terms of their rates, their qualification requirements, and their loan closing requirements to get a better picture of how your lender compares to other banks in your area.

FRMs vs ARMs

Fixed-rate mortgages grant you the straight forward benefits we’ve come to know: the fixed rates over the life of the loan, the simple budgeting, security, and no surprises. They do however have higher rates than those of adjustable-rate mortgages’ initial period. Their most advantageous hour is when all other rates have skyrocketed with yours remaining unaffected and manageable.
The attractive factor of adjustable-rate mortgages is their initial rates which are lower than those of the full length of fixed-rate mortgages. They can be easier and cheaper to refinance to and from, making them the go-to mortgage plan for first-time homeowners.

Closing Day

Once you’ve been approved for a loan, your bank will begin a 30-day countdown in which the rate you’ve chosen is set to remain fixed unless you back out for whatever reason. The rate you’ve chosen will remain fixed for the life of the loan if it’s a fixed-rate mortgage, or gradually change after the initial period of an adjustable-rate mortgage is over (1, 2, 5 years, etc.).

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Ideally, you will need the following to be handed in on closing day:

1) A 20% down payment: More is always better for a lender while less is considered too risky for a lender and you would have to compensate for it in the form of insurance payments and higher interest rates.
2) The Loan Estimate: This is the document given to you on the day you’ve been approved for a loan. It outlines the loan amount both parties agreed to.
3) The Closing Disclosure statement: This will be sent to you a few days before closing day. It details the loan amount, how payments made will be financed into the loan, and how fees will be dispersed among escrows, underwriters, attorneys, etc.
4) Home protection insurance: This is mainly to protect the lender’s rights on the property and it usually takes the form of flood insurance in areas where floods are likely.
5) Property taxes: This is to prove that the property has no taxes imposed on it.
6) Home appraisal: Typically only certified appraisers issued by the lender in question can perform an appraisal of your home.
7) Poor Credit Score

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If your credit score is below 640, it is considered poor and high-risk to a lender. Alternatives, however, do exist for low-income families and veterans. VA and FHA loans require little to no down payments.

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