Are you in the market to buy your next home and feeling bogged down by mortgage paperwork? Purchasing property is a huge life decision and investment. Instead of getting stressed about all the mortgage forms, think about how amazing it will be once your new home is all yours.
When purchasing property, it is important to apply for and secure the right mortgage. The often cryptic vocabulary and intricate steps within mortgage documents can make the process seem daunting and difficult to fully understand. Platinum Properties is here to make mortgages make sense.
Follow these five steps and you will be able to breeze through the mortgage process with ease.
1. Organize Your Financials
Upon applying for a mortgage, the lender will review your financial history, such as your credit and income. Know your credit rating far in advance as you do not want to have any trouble during the application process. If there are any red flags, take action to start clearing and paying off negative debt and erase old collections. Organize and make copies of documents, such as your tax returns, bank statements, and pay stubs and be ready to produce these documents in a timely manner to make the process as fast as possible. Being organized can help you get approved for a loan faster and erase any last minute delays for approval.
2. Be a Smart Shopper
Who doesn’t love a bargain? You want to get the best deal possible, especially with such a large purchase. It’s important to find a trustworthy lender whose terms work with your overall goals. There are many different types of loans to fit your needs, such as FHA or conventional loans. Always compare the APR, as it is the best way to check which loans are the least expensive. Experts at Platinum Properties can surely assist you in this process.
3. Time To Apply
At this point your information is organized and updated and you have decided which loan is right for you. Now it’s time to submit a formal loan application and requested documents. Be sure to understand the application in full, ask questions, seek second opinions, and double-check the term of your loan. Once the approval comes, you are in a contract for a large amount of money. Make sure you are ready and all sections of contracts are thoroughly reviewed.
An underwriter is an agent of a lender. Underwriters are well-versed in the guidelines under which your loan can be approved. Upon receipt of your file, the underwriter will review your income, assets, debt, appraisal, and credit to ensure your loan can be approved under their terms.
Many applicants think this is a time to start shopping for new furniture and pick out curtains, but this is an active time to further clear credit situations and obtain other home purchase requirements including inspections, homeowners insurance, and title insurance. During this time, avoid taking out new lines of credit. A simple move can greatly affect your score while you are in the underwriting phase.
You have cleared the underwriter’s conditions and are officially approved for your loan. Congratulations! Now it is time to schedule your closing. Always read your HUD1 Settlement Statement which legally defines your loan terms. Make sure to bring the cash and checks requested as well all identification documents needed to the closing. Not having these items in hand can often delay closings. Have your lawyer present at closing to make sure you understand the final terms. That’s it, after the closing you are now a homeowner!
Certain technical terms related to mortgages can be confusing, so Platinum Properties gives you all the tools to properly understand what you are signing. Here’s a list of mortgage terms that may be unfamiliar, especially to the first time mortgage applicant:
Annual percentage rate, or APR — A standardized method of calculating the cost of a mortgage, stated as a yearly rate, which includes such items as interest, mortgage insurance, and certain points or credit costs. Since APR includes these other items, it is higher than the interest rate a lender will quote.
Appraisal – Provides lenders information about the home and its marketability in the event the borrower fails to repay the loan.
Conventional Loan – Loans not insured by government agencies like the Federal Housing Administration and the Department of Veteran Affairs. These loans are generally insured by private insurance companies.
FHA Loan – A U.S. Federal Housing Administration mortgage insurance backed mortgage loan which is provided by a FHA-approved lender. FHA insured loans are a type of federal assistance and have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford.
HUD-1 Settlement Statement – A standard form in use in the United States which is used to itemize services and fees charged to the borrower by the lender or broker when applying for a loan for the purpose of purchasing or refinancing real estate.
For more information on mortgage closings costs on townhouses, co-ops, and condominiums, check out the Platinum Properties resource page on closing cost estimations.
Looking to purchase a home in New York City? Find your ideal neighborhood, read our Buyer’s Guide, and contact a Platinum Properties expert to lead you through this exciting process.