Going through the home buying process for the first time can be overwhelming and intimidating, especially when it comes to getting a mortgage. There’s a good chance a number of questions will arise as you begin exploring your loan options, but a knowledgeable lender can provide the answers you need to become a more confident investor. They will help ensure you have all the information you need to secure financing with the best available terms. Here are some of the most frequent inquiries homebuyers have when applying for a mortgage. 

Common Questions Concerning Mortgages

What is the difference between being pre-qualified & pre-approved?

Pre-qualification is an estimation of the loan amount you’re likely to be approved for, but it’s not a guarantee the lender will approve you once you actually apply. A pre-qualification calculation is typically based on an interview conducted by a loan officer. Pre-approval requires additional steps in which an application must be submitted and credit and financial history verified. A pre-approval letter tends to put buyers in a better position to negotiate on price and close earlier.  

What paperwork do I need to apply for a mortgage? 

There are several documents you can expect to need when applying for a mortgage. Having these on hand and organized will help expedite the approval process. Though the paperwork required can vary from lender to lender, in most cases, you will be asked to provide copies of your tax returns for the past two years, last three bank statements, pay stubs, asset statements, social security card, driver’s license, and proof of funds. 

Should I get a fixed-rate or adjustable-rate loan?

With a fixed-rate mortgage, the interest rate remains the same for the life of the loan. In contrast, the interest rate on an adjustable-rate mortgage will change periodically based on a market index. This means your monthly payments on a fix-rate mortgage will be stable while they are likely to change with an adjustable-rate loan. The one you choose will depend on a variety of factors, such as how long you plan to stay in the home you buy. 

What is included in a mortgage payment?

For the majority of homeowners, monthly mortgage payments are designed to include four parts, which are principal, interest, taxes, and insurance. Principal refers to repayment on the amount borrowed. Interest is the payment collected by the lender on the amount borrowed. Generally, a portion of your yearly property taxes will be calculated into your monthly mortgage payments and put into an escrow account. The insurance component is composed of homeowners insurance as well as mortgage insurance if your down payment is less than 20%. 

Asking questions is key to finding a mortgage that’s the right fit for your specific situation. Spirit of America Federal Credit Union takes the time to educate homebuyers before they start the application process. They will help you carefully evaluate and compare different types of loans so you can make the smartest investment possible. Call (402) 467-1102 to have all your mortgage questions answered by the top banking professionals in Lancaster County, NE, or visit their website to learn more about applying for a home loan.