What is a Mortgage?

Simply put, a mortgage is a financial transaction that involves a promise, official documentation, and government regulations to repay a significant debt. As a big investment and responsibility, homeownership requires preparation and trust in a local lender.

Similar to the people they assist, mortgages offer a wide range of options. These options cater to low-income borrowers, individuals purchasing luxury dream homes worth millions, and first-time homebuyers beginning their journey.

Before embarking on the home loan application process, here are a few key points to keep in mind.

What are Mortgage Rates?

When it comes down to it, your mortgage will exist as a piece of paper and a promise. When you’re officially ready to begin the home loan journey, one of the first things you will need to know about is rates.

Mortgage rates are the interest charged on your loan and are constantly changing based on market conditions. Market conditions take into consideration, the economy, characteristics of the housing market, and the feral monetary policy. Your current financial situation will also impact the interest rate you get on your home loan.

The lower your interest rate, the cheaper your loan will be. If this is your goal, consider what type of loan you’ll apply for, your qualifying factors, and the market condition – these are all things our experienced mortgage loan originators can help you with.

Paying attention to the housing market will also help determine the interest rate you may be able to get.

  • A housing market where the supply exceeds the demand is called a buyer’s market. This means that though many properties are available, there’s a shortage of buyers interested in purchasing them. These market conditions give buyers the upper hand over sellers, compelling the market to respond accordingly.
  • A seller’s market occurs when the housing demand exceeds the supply, meaning there are many interested homebuyers but a shortage of real estate inventory. Because there are more buyers than available homes in these market conditions, sellers have the advantage.

What is an Annual Percentage Rate?

Different than your loan’s interest rate, the annual percentage rate is the overall cost of the mortgage. This includes interest, closing costs, and a variety of other fees accumulated of over the lifetime of the loan.

How Do I Qualify for a Mortgage?

You may not even realize how easy it could be to qualify for a mortgage. To find out what the best options for you are, it’s best to get pre-qualified. The term pre-qualification refers to an estimate for credit given by a lender based on information provided by a borrower. Pre-qualifications are conditional and involve the lender reviewing a borrower’s creditworthiness before granting a pre-approval. Lenders generally use this as a marketing tactic for creditors seeking to obtain new customers, especially for things like credit cards and mortgages.

When you apply for a mortgage, our underwriting team will compare the different qualification as they assess your creditworthiness. They’ll look at the full picture and examine various factors like employment history, income level, debt-to-income ratio, credit history, and down payment.

Our lenders want to know that you a consistent income and one that will support a mortgage!

Our Wide Variety of Mortgage Options

As a potential homebuyer, you will find that our local lenders offer a several popular loan types: Conventional, FHA, USDA, and VA loans. Each loan is designed to benefit homebuyers in different ways. Click here to see all of our available programs here.

What Makes up a Mortgage?

There are four main parts that make up your monthly mortgage payment: principal, interest, taxes, and insurance.

  • Principal is the actual amount that you borrowed.
  • Property taxes can range from 0-2.5% of your monthly payment. It’s common to find that the property tax will also be added to your monthly mortgage payment.
  • Interest is the annual cost to borrow money. It is paid monthly.
  • Mortgage insurance protects your lender if you default on the loan. In most cases a premium is calculated annually based on a percentage of your loan and charged monthly.  Mortgage insurance remains on a Conventional Loan for 11 years on a 30-year loan term. While as FHA and USDA require mortgage insurance for the life of the loan.

What are Closing Costs?

Closing costs are the fees you pay for closing a mortgage. At the closing table, you’ll sign all your mortgage documents and finalize the paperwork that make you the effective owner of your home. Your closing costs will be 2%-5% of your home purchase price, with varying factors impacting that percentage. Some of these variables include the state you close in, the type of loan you receive, and even your lender. You can look for an itemized list with specific closing fees on your loan estimate and closing disclosure.

My Mortgage is Paid Off, Now What?

You will receive a mortgage release! This document, also known as mortgage satisfaction paperwork, shows that your loan is paid in full, and the lender no longer owns a lien against the house. Once you have officially paid off your home and your mortgage are free and clear, you are going to have to start paying any monthly charges, such as insurance, and property taxes yourself.

What if My Mortgage isn’t Paid off and I’m Ready to Refinance?

If timing is right, refinancing could save you hundreds of dollars a month on your mortgage payment. Our best advice is to reach out to your local lender; they will help you review your mortgage and help you determine if refinancing is the best option or not.

Our Possibility Protection program could be a great path to consider if you are in a position to refinance. If you refinance within three years of your purchase date, you will receive a reduced cost refinance with USA Mortgage. We believe that homeownership is possible for everyone; if you are meant to be in your dream home today, we’ll help you lower your payment later.

 

Applying for a mortgage doesn’t have to be a daunting task. At its core, it is simply a commitment to repay a substantial sum of money, and now more than ever, it is easier to apply for a loan. With numerous loan options available, and the convenience of our mobile loan app and knowledgeable mortgage experts at USA Mortgage, the application process is made effortless. If you are ready to embark on your mortgage journey, visit usamortgage.com/find-a-branch to find a local lender near you.

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