What is a Mortgage?
A mortgage is a written agreement between two parties in which one party agrees to provide funds to the other for the purchase of the property. The lender extends credit, based on the value of the home, at an agreed-upon interest rate and term. The borrower makes monthly payments until they have paid off the entire loan amount with interest.
Mortgages are typically formed when borrowers secure a home loan with the financial institution to purchase the house of their dreams. A mortgage is based on an agreement between two parties-the borrowers and lender.
The Mortgage Process
The first thing you need to know is that there are two parts to this process — the search for your dream house, and then actually getting your loan approved. Remember these are two separate processes completely. What happens when you find the perfect house? You need to contact a real estate lawyer and get the ball rolling.
You need to write up an offer that lists just what you are willing to pay for the house, but remember that oftentimes, this is usually much less than what the seller is asking for. Your offer needs to be in writing and should include your earnest money deposit which shows the seller you are serious about buying their house. This is usually about 1 percent of the sale price.
What’s next? You sign some papers, hand them back to the real estate lawyer and sit tight. Sometimes it takes a little while for the seller to go through all of the offers they’ve received, but if you are offered the house, congratulations! It’s time to start working on that loan.
A mortgage is a loan, so you need to get yourself some loans first which are called “conditional approvals.” This step simply indicates you can pay back the money, but it also does something else very important. It serves as proof of income for you (most likely with your W-2s and tax returns) but it also allows you to get pre-approved for the house.
Where Can I Get a Mortgage?
Obtaining a mortgage is not difficult, but the process can be cumbersome.
The best approach to getting approval for a mortgage is to work with an expert who can navigate through the process efficiently. A professional broker will help you secure your loan, sparing you from having to wade through complicated terms and paperwork on your own. Most importantly, they are commites to finding you the most affordable solution.
What do real estate lawyers have to do with mortgage loans?
Lawyers have a lot of say when it comes to buying or selling a house. They can also help you in understanding your mortgage loan agreements.
A lawyer can advise you during the mortgage loan application process. A real estate lawyer can provide you with a legal opinion in writing, which will help in gaining financing from a financial institution.
There are many types of mortgages available and some of them may not be suitable for you. If you choose a type that does not suit you, or if you do not understand the terms and conditions, then your financial situation could become very fragile. A real estate lawyer can help in preventing this from happening.
If there is an error on your credit report, lawyers can help.
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Types of Mortgages
The different types of mortgages are:
- Fixed-Rate Mortgage = you have a fixed rate for your payments and a fixed term. At the end of the term, you should have paid off your mortgage completely.
- Variable Rate Mortgage = allows for changes in interest rates during the term of the loan.
- Reverse Mortgage = money will pay to you, typically when you are older and your house is worth more than what you owe.
- Line of Credit = you can borrow money at any time. You can pay it back as soon as the need is over. This typically accrued for things like home renovations, education expenses, and other large expenses.
What Do Lenders Look at When Approving You for a Mortgage?
Lenders think about a few variables when choosing whether to approve your home loan application. They look at your pay, initial investment, resources, obligations, credit, and actual property.
Income
Your pay is the single most crucial element to be able to get a mortgage loan. The idea of getting a home loan is to have a safe place for you and your family. This means that every deal must fit every other deal: income, obligations, credit history, and property. Approval turns more complex if the individual has a bad credit history.
Down Payment
The lender likely asks for cash if you are putting less than 20% of the entire purchase on the property. This is because lenders want to make sure that you will not end up with no cash or not enough money invested in your house purchase, thus resulting in foreclosure.
Existing Debt and Other Financial Obligations
Lenders want to be confident that you will continue to pay your mortgage, payments, or credit card debt on time. They wish for you to not spend money on properties that you cannot afford. Sellers may also require evidence of this stability before they will even consider giving you the chance to purchase their house.
Bottom Line
Our team of experts is ready and waiting to partner with you in your journey to securing a mortgage. We can help ensure that everything will be done correctly from the moment you sign on the dotted line.
