FIRST CHOICE MORTGAGE

It is time to contact the seller who may be an individual or representative of a real estate agency.  Negotiations can begin for the sale of the property.  Once the buyer and seller have agreed on a purchase price and developed sales agreement, it is time for the buyer to apply for a loan.

Applying for a loan is very simple and straightforward.  If you would like to go ahead and try to pre-qualify or submit a loan application, please contact our office.  Your information can be taken over the telephone and you will be contacted within 24 hours by a loan officer.

Your Income

    The amount of income you earn will determine the amount of money you can borrow to purchase your home.  For example, if a person makes $5000 a month and spends $1600 on a mortgage loan, including property taxes, mortgage insurance and hazard insurance, the housing expense ratio is 32% (1600 divided by 5000). 

Your Debts

    The lender will look at the monthly debt such as loan payments, charge cards, child support, made monthly by the applicant.  The percentage of debts to income is known as the debt-to-income ratio.  A good goal is to spend about 41% of your income on all debts including the contemplated mortgage payment.

Your Employment History

    It is important for the lenders to see a steady employment in any occupation held by the applicant.  A Verification of Employment Document will be requested by the lender to verify your work history. 

Your Credit History 

    Each borrower has a credit history report that is filed with the Credit Bureau.  Lenders receive a copy of your credit history in the loan application process in order to determine your willingness to pay as a borrower.  This assessment depends on your credit record, ie. if you have been late on your various payment obligations.

What Is The Property Worth

    The lender will want to know the value of the prospective home.  The loan amount approved will depend on the value of the property to be determined by an appraiser.  This appraisal is to ensure that the lender can recover the money he lends, even if you stop making payments.  If the borrower fails to repay the loan, the lender has the right to sell the home to pay off the loan -- a process known as foreclosure. 

Pre-approval allows the borrower to be pre-approved for a loan before shopping for a home.  Sellers and real estate agents will know you are a serious and qualified buyer.  Pre-approval can be done over the telephone, and you should hear from a loan officer with your pre-approval status within one business day of pre-approval application.

The loan requires certain documents for approval.  These may include credit reports, the loan application, an appraisal of the property, income verification, asset verification, and various other documents depending on the complexity of your personal financing situation.

The settlement closing of a loan requires about 30 days from the date of the locked-in rate.  While at settlement, you will read and sign numerous documents related to the purchase or refinance of your property.  Your settlement agent will be able to answer any questions you may have regarding these documents.  Settlements usually run smoothly and are completed with in one hour.

Once a loan has been approved by the lender, the buyer is asked to go to the settlement to sign papers, and the loan process is complete!  There are certain costs in closing a loan which usually amount to about 2%-6% of your mortgage loan.  For example, if your mortgage loan is $85,000, your closing costs might range from $1700-$5100.  These closing costs will be in addition to your down payment on the house.

Origination Fees

    Your lender will charge a fee to cover the administrative cost of processing your loan.  This fee is usually a one percentage of the loan amount.

Items Paid in Advance (Prepaid Escrows)

   Most lenders require you to pay for some items that will be due after closing.  These pre-paid items usually include first year insurance premiums (for hazard and mortgage insurance) and real estate taxes.

Title Charges

    A title is the document that shows who owns a property.  It is necessary for an attorney to examine a title to make sure there are no problems that would prevent you from having "clear" (legal) title.  It is also necessary to get title insurance in case someone else should try to claim title to your property.  Fees for title examination and title insurance will be included in the closing costs.

Recording and Transfer Charges

    A record of your home purchase will be on file with your local government, and there is a small fee to cover the cost of paperwork.

Attorney's Fee

    This fee is to pay the attorney or closing officer for preparing and reviewing all of the documents needed to close your loan.

Mortgage payments consist of costs for principal, interest, property tax, hazard insurance, and mortgage insurance.

Principal

    The principal is the amount of money you borrowed.  Each month when you make your mortgage payment, you are paying back a small portion of the principal.  The longer the payments are amortized (over 30 years for example), the more the payments go to reduce to principal you owe; over time, interest will become a smaller part of your monthly payment.  In the beginning, most of the mortgage payments made to the lender will be interest payments.

Interest

    Interest is the cost of borrowing money, usually expressed as an annual percentage of the loan amount - for example 8.125%, 9.000%, etc.  Lenders will offer different rates depending on the type of loan program offered.

Property Taxes

    These are paid to local governments, usually charged as a percentage of the property value.  Your lender collects the taxes through your monthly payments.  The amount of tax will vary depending on the location of the home.

Hazard Insurance

    This is a contract that protects you from any financial losses on your property that might result from fire, flood, or any other hazard.

Mortgage Insurance

    This is an insurance policy that pays mortgage lenders for part of their financial losses if a borrower fails to fully repay a loan.  Mortgage insurance makes it possible to buy a home with a low downpayment.

Refinancing involves obtaining a new mortgage loan on a property already owned - often to replace existing loans on the property.  When the mortgage rates are low, it may be a good time to refinance.  Refinancing can save you money on your monthly mortgage payments.