Mortgage 101

A lot goes into a mortgage and it can be confusing at first. Heres a guide that tells you all you need to get started with before talking with a Loan Orignator. (Our brokerage has one in office!)

Lets start off with the basics, a Mortgage. A mortgage is a loan used to purchace or refinance a property. 

Loan Programs-There are many different kinds of loans that are avaialble and different loan programs to choose from.

Examples of loan programs would be

1. VA Purchase (100% financing) or VA IRRRL (refinance)
2. FHA Loans 203b(purchase) or FHA 203K (renovation)
3. USDA loan - rural areas (100% financing and has income limits)
4. Conventional (Fannie/Freddie) - Options available with as little as 3% down
5. NonQm Loans - Bank Statement program, DSCR, Foreign National, Interest Only 

Intrest Rate-With the different loans, comes different interest rates. Interest rates a loan will vary depending on the loan program, terms, property type, and the borrowers credit. 

• Fixed Rate for life of loan 
• 2 / 1 Temporary Rate Buydown 
• ARM - Adjustable Rate Mortgage 

Mortgage payment- This is normally described as PITA, this is what all is calculated to figure out what you can afford!

• P = Principal 
• I = Interest
• T = (Property) Taxes
• I = Insurance
• A = Association Dues 

*Mortgage insurace premium may apply depending on loan to value and loan program. 

Escrow Account-An escrow account is put in place for the property taxes and property insurance portions that are collected on a monthly basis to have sufficient funds for payments of insurance premium renewal and annual tax bill. 

Pre-Qualified-A lender has reviewed credit, income/assets have been verbally confirmed but not verified. Along with having the initial automated underwriting system analyze loan application. This is what will be used to based what price range you wil start your home search at.

Pre-Approved- A lender has reviewed/received credit, income docs, asset docs and has obtained Underwriting Pre-Approval. This is what will be used to make a offer on a home!

Documents needed- Basic documents to begin PreQualification/PreApproval would be:

• Driver's License/ID 
• Social Security Card
• Bank Statements for last 2 years (all pages even if blank)
• Most recent 30 days of paystubs
• Last 2 years W-2s
• Last 2 years Tax Returns if Self Employed (all pages even if blank)
• Divorce Decree or Child Support Order - all pages even if blank
• Income verification letter such as Social Security Award letter or VA Benefit Letter
• REO Documentation such as Mortgage Statement, Insurance Dec Page, and HOA statement. 

If you have any more questions on mortgages, feel free to reach out!