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Step 3

 You've found your dream home and you submitted an offer....You're one step closer to becoming a home owner! Now what? It's time to get your home mortgage! In this step, learn about your rights as a hombuyer, choose a loan that's right for you, and learn about the mortgage process.

What are my rights as a homebuyer?

The Fair Housing Act protects your rights as a homebuyer. As you shop for a mortgage and move through the mortgage process, no one may take any of the following actions based on sex/gender, national origin, religion, race or color, familial status or disability:

  • Refuse to make a mortgage loan
  • Refuse to provide information regarding loans
  • Impose different terms or conditions on a loan, such as different interest rates, points (which are a one-time fee from the lender and equals 1% of the loan) or other fees.
  • Discriminate in appraising property
  • Refuse to purchase a loan
  • Set different terms or conditions for purchasing a loan

For more information about the Fair Housing Act, go to http://www.hud.gov.

Which loan is right for me?

As you start the mortgage process, its important to understand the different types of loans, and which loan best meets your needs. It's important to consider the following when you shop for your loan:

  • Payment stability
  • Ability to qualify for the loan amount
  • How long you plan to live in the home
  • Whether your income is stable or rising
  • Potential increase in interest rate changes
  • Up-front costs
  • Affordability of your monthly mortgage payment

In general, your mortgage payment will include a principal and interest payment, amount to cover your real estate taxes and homeowner's insurance, potential additional costs for home owner's association dues or mortgage insurance depending on the loan.

To help determine the loan that's best for you, its good to know the following basic mortgage terms.

Fixed vs. adjustable rate mortgage

Fixed rate mortgage feature a nonchanging interest rate. With a fixed-rate loan, the principal and interest portion of your monthly mortgage payment do not change; however, real estate taxes and homeowners insurance costs may change from year to year, resulting in a higher or lower monthly payment.

Adjustable rate mortgage mean you assume some of the interest-rate risk that the lender normally assumes on a fixed-rate mortgage. For taking this risk, you would usually receive a lower initial interest rate than the fixed-rate mortgage's interest rate, but your interest rate can adjust periodically to reflect market conditions.

Amortizing vs. interest-only mortgages

To keep monthly payments as low as possible, some lenders offer interest-only mortgages. These loans typically do not require any principal payments for a set period of time. Typical interest-only time periods are 5, 7 and 10 years.

Amortization refers to the process of paying off a debt over time through regular payments. An amortization schedule is a table detailing each periodic payment on an amortizing loan.

Mortgage term options

Mortgage loans have varying terms. Most terms can range from 15 to 30 years. The term of your loan affects monthly payment and building of an equity. Equity is a term used to describe the difference between the market value of your property and the amount you owe. The shorter the loan's term, the higher the monthly payment and the quicker you buid equity. Conversely, a longer term results in lower monthly payments, but slower to build up equity.

Down payment options

Down payment is your initial investment in your home. The larger the down payment, the more equity you have in your home from the start, and the smaller your monthly payment. Minimum down payment required varies on the type of loan. Your licensed loan officer can explain to you the different down payment option that fits your financial situation.

The mortgage process

 Now that you are ready to take the next step into the process of becoming a homeowner, its important to understand the basic mortgage loan process. The time frame it takes to complete the process will vary depending on the geographic location, the loan, you and your lending instituion - it's a fly wheel effect.

1. Application

You will start with the application process. You will need to complete a mortgage loan application so that your lender can assess your ability to qualify for a loan. Once the application is completed, your lender may ask for additioonal documentation needed to pre-qualify.

2. Reviewing documents

Once you are deemed pre-qualified, your lender will send you a set of mortgage disclosures. Within the documents provided by the lender, you will find the following documents:

Good Faith Estate (GFE) - this is the lender's best estimate of your closing costs. It shows an estimate of the amount of any fees your lender may charge to process or close your loan, such as mortgage insurance, title insurance, and recording fees.

Truth-in-Lending Disclosures (TIL) - This document provides a summary of how your loan will be repaid and itemizes the costs associated with applying for a loan. The TIL includes the finance charge, annual percentage rate (APR), number of payments you will make, amount of each payment, and due date (for fixed loans), late payment charges that may apply and the total amount you will pay in principal and finance charges over the life of the loan.

Commitment Letter - This is a promise from the lender to make you a loan. It includes all of the specifics of the loan as well as any conditions that must be met prior to or at closing, and information on the loan amount, term, origination fee, and interest rate.

3. Ordering documents for the loan file (Processing)

In this phase of the process, your lending institution may order documents such as property appraisal, verification of employment, and credit report. Once these documents are ordered, the lending institution must wait to receive the ordered documentation before moving forward in the process.

4. Underwriting

Once the file is submitted into underwriting, the underwriter will make sure all loan requirements are met, and issue a loan decision. During this phase, the underwriter may request for additional documentation to support the loan decisions. The underwriter may request that the information is needed before making a loan approval and it is critical that you provide the requested documentation as quickly as possible in this case. The underwriter may also approve the loan with "conditions". Conditions mean that you will need to provide additional information at closing or before the loan can become final.

5. Preclosing

 Once the loan is approved, the title insurance is ordered, approval contingencies are met, and closing is scheduled.

6. Closing

Once the closing is scheduled, the borrower is responsible for ordering home owner's insurance. At the closing, the borrower obtains his or her loan proceceds and presents a certified check to cover the balance of the down payment and the closing costs. Ta-da! The loan closes and the borrower moves into the new home!  

Christopher Murray, Sr. Loan Officer, AVP NMLS #103453
Homeside Financial
4141 Parklake Ave Suite 530, Raleigh, NC  27612
Cell:  (919) 656-8375
cmurray@gohomeside.com
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