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THE MORTGAGE

What Is a Mortgage Loan?

A mortgage is a loan used to purchase real estate, often a primary residence. When you sign a mortgage loan, you agree to repay a certain amount each month plus interest for the term of the mortgage. Most mortgages last 15 or 30 years, but some lenders offer other mortgage terms.

With a mortgage, the home or property acts as collateral for the loan. If you do not make payments, the lender can eventually repossess the home. If you want to change the terms of your mortgage, you can apply to refinance for a lower interest rate or shorter loan term.

Conventional mortgages require a 3% down payment. They allow you to finance a home worth up to an annual maximum established by Fannie Mae, a federally-based mortgage company. Government-backed mortgages, such as FHA, VA, and USDA loans, have less strict approval requirements, so they are popular among first-time home buyers. Jumbo mortgages exceed the threshold for conventional mortgages.

What Should a First-Time Home Buyer Look Out For?

These are some of the most important considerations for first-time home buyers:

  • Setting a realistic budget for your mortgage based on your income and expenses

  • Making sure you dispute inaccurate items on your credit score

  • Researching first-time home buyer programs if you need down payment or closing cost assistance

  • Having an emergency fund set aside for home repairs and other unexpected expenses

  • Deciding on a neighborhood and looking at homes in your budget

  • Getting a home inspection to check for serious issues with the property

  • Purchasing homeowner’s insurance to cover the value of your property and belongings

How to Apply for a Mortgage Loan as a First-Time Home Buyer

Getting pre-approved is the first step to get your first mortgage. You submit a short application with your financial information, such as income, and personal information, such as Social Security number. Lenders should only do a “soft” credit check at this stage, which does not affect your credit score.

Using these details, lenders provide a pre-approval letter with your estimated mortgage amount, interest rate, and other terms. However, these terms may change when you complete the final application.

Once you decide to move forward with a loan offer, you must complete the entire application. The lender will also ask for supporting documentation as your application enters the underwriting process. You must provide pay stubs, tax forms, bank and credit card statements, investment statements, and employment verification. Assuming all your information checks out, your loan will close and you can take possession of your new home.

How Does the Mortgage Loan Process Work?

If you’re a first-time home buyer, the mortgage process can seem complex. Once you submit all supporting paperwork, your loan will enter the underwriting process. The lender will check to make sure you have the credit and income to repay the loan and confirm other aspects of your application.

The lender will also verify your down payment and funds for closing. The underwriting agent will confirm the source of large deposits in your account and confirm that you have cash reserves. Many lenders require savings of at least two to three times your monthly mortgage amount in reserve to complete the underwriting process.

During the mortgage application process, the bank will order an appraisal of the home. They want to make sure its value exceeds the amount of the mortgage loan. You may also want to have a home inspector evaluate the property before you move forward with the purchase. Some mortgages, such as FHA loans, require the borrower to get a home inspection.

Three days before the scheduled closing date of your mortgage, the lender must provide the closing disclosure. This legal document provides the final terms of the loan as well as the total closing costs. 

FOGATA Realty
Preferred Lender and Home Insurance

Address

506 Ramseur St,
Durham, NC 27701

Contact

919-260-0173

Opening Hours

Mon - Fri

9:00 am – 4:00 pm

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