Written By: Buffini & Co
Buying your first home or your next? Stay prepared with this quick guide.
Types of Mortgages: A mortgage is a loan that uses property as collateral to help finance homeownership.
- Fixed-Rate
- Specific interest rate that stays the same for the duration of the loan.
- Adjustable-Rate
- Typically starts at a lower rate than fixed-rate mortgages but the rate can increase over time.
- Conventional Loan
- A loan of no more than 80% of a home's purchase price or appraised value.
- High Ratio Mortgage
- The mortgage loan exceeds 80% of the property's value.
- Open Mortgage
- Repay all or part of your mortgage anytime during the term without a prepayment charge.
- Closed Mortgage
- You cannot prepay, renegotiate or refinance before the end of the term without paying a prepayment charge.
The Perils of Not Preparing:
- Miss out on great properties.
- Settle for less than you want.
- Scramble to get finances in order.
Know What You Can Control:
- Credit Score
- Income/Debt
- Down payment/savings
- Get professional advice
Know What You Can't:
- Monetary Policies
- Inflation
- Housing Market
- Overall Economy
Next Steps
- Get your finances in shape. Review your credit, savings, and debit to understand where you stand.
- Talk to a qualified mortgage professional about loan options and get preapproved.
- Start looking.
- After you find a home and your offer is accepted, your loan application will then be reviewed by the lender's underwriter to assess your ability to repay the loan.
Prequalified Versus Preapproved
Prequalified
- Informal step where you provide a lender with basic info about your finances. They then give you a general idea of what you can afford.
Preapproved
- Loan officer reviews your formal application, credit score, finances and other pertinent documentation before approving you for a specific loan amount. It shows sellers you are serious about buying.
