Mortgage Loan Basics for Home Buyers


If you are thinking of buying a flipped home, you are about to embark on an exciting, but stressful journey. You can reduce the amount of anxiety you experience by having a basic understanding of home mortgage loans and what is involved in obtaining a loan to buy your new home.

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? What Is a Home Mortgage Loan

If you’re like many homebuyers, you do not have hundreds of thousands of dollars sitting in the bank readily available for you when you decide to buy a home. For this reason, you’re going to need a home mortgage loan. When you obtain a home mortgage loan, you are borrowing the cash needed to purchase a home.

? Different Types of Mortgage Loans

You’ll be glad to know there are different types of mortgage loans that can be offered to you based on your circumstances. A conventional loan is offered by a financial institution and is not backed by the government. There are different terms for such a loan and your lender can assist you in determining the best terms of the loan.

A government-backed loan is guaranteed by the federal government. There are three such government loans available to buyers.

  • The Department of Housing and Urban Development administers the Federal Housing Administration (FHA) Loan. This loan is available to all types of borrowers and its major advantage is that a required down payment can be as little as three percent of the home’s purchase price.
  • The Department of Veterans Affairs offers VA Loans. This loan is available to all military personnel and their families. Such individuals have a major advantage because they can receive 100 percent financing which means there’s truly no down payment.
  • The Department of Agriculture administers USDA/RA Loans. Such loans are available to rural buyers who meet certain income guidelines.

You will receive either a conforming or jumbo loan, depending on the amount of money you are borrowing. A borrower can more easily obtain a conforming loan versus a jumbo loan. The guidelines governing jumbo loans are more stringent and can make it difficult for a buyer to qualify for the loan.

? Variable vs. Fixed Rate Mortgages

When you obtain a loan, you will either have a variable or fixed rate. The choice is up to you. If you want to start out making lower monthly payments and can prepare for the ballooning payment, then a variable rate might be for you. However, this option leaves a lot of unpredictability which many buyers don’t like. That is why many will opt for a fixed rate. When you choose a fixed rate, that rate is going to stay the same for the duration of your loan. Your monthly payments will be consistent from the start of the loan right up until you make the last payment.

? How to Apply for a Home Mortgage Loan

When it’s time to apply for a home mortgage loan you must be prepared to provide your lender with every aspect of your financial life. The most important data they will request includes:

  • Most recent paystubs
  • Most recent W2 or income tax return, if self-employed
  • Most recent bank statements, including checking, savings and money market accounts
  • Retirement accounts
  • Driver’s license
  • Debts, including balances
  • Mutual funds and balances

When you apply for a mortgage, your lender will also need permission to view your credit report. There is often a fee for this and you will need to pay this to your lender. In addition, to the credit report fee, you’ll also be required to pay a loan fee to cover the costs of processing your loan application.

✔️ Getting Pre-Approved for a Mortgage Loan

The one thing some buyers overlook in the beginning is getting pre-approved for a mortgage loan. You might decide that it’s time to start looking for your new home and go out and start picking out your favorite houses. But, have you considered the fact that if you haven’t been pre-approved that maybe you can’t afford the homes you’re looking at? Or, the opposite could happen. You might shortchange yourself and look at homes that don’t have all the features you desire because you think you can’t afford what you really want. Getting pre-approved in the beginning allows you to know what price range you need to be in and you can proceed accordingly.

Buying a house is a long-term commitment which is why you need to understand home mortgage loans. Such an understanding will ensure you will be able to handle the purchase of a home.

Your real estate agent is the best source of information about the local community, real estate topics and specifically knowledge about buying a flipped home and real estate investments.  Give Gabriel Heck a call today at 425-835-3108 to learn more about local areas, discuss selling a house, or tour available homes for sale.