A mortgage is made up of many things like home loan rates, deposits and many more. However its main purpose is being the legal contract between a buyer and a lending institution that uses a specific asset as collateral for the loan. Although a mortgage can secure any asset, it is typically used to purchase a house or another type of real estate. Pre-qualification is the first step in the mortgage process. Once you are pre-qualified, it will make the process of searching for a home much easier because you will know how much the lender will loan for the purchase.
During the pre-qualification process, your income and assets will be evaluated to determine how much you can afford each month. There are various loan products available including 15- and 30-year fixed-rate mortgages as well as several types of adjustable rate loans. Other factors used to determine your mortgage payment is the size of your down payment, property taxes and if mortgage insurance is required. The information for a particular loan will be entered into a mortgage calculator to determine the maximum home value that you can afford under that program. A mortgage calculator enables you to compare the payments required for each type of loan product to find the best one for your financial situation.
After you find a property that you like and the owner accepts your offer, you can submit a formal mortgage loan application. The application provides the lender with detailed information about the property and your current financial situation. The lender will also perform a credit check. If you are approved for a loan, you will then lock in the interest rate and other terms of the mortgage, such as the down payment and number of points. A point is one percent of the loan amount. An appraisal will confirm the current market value of the home to ensure that it is within the limits of your ability to service the debt.
During the closing transaction, you and the seller will sign the documents required to transfer ownership of the property. You will also sign your mortgage loan documents, which place a lien on the home that will remain in effect until the loan is paid off. These legal documents also enable the lender to foreclose on and seize the asset if you, the borrower, fail to make timely payments on the loan.
By Garry Dowd