Heres a short article and helpful explainer video, giving you some tips on choosing a lender for your mortgage loan. While applying for a mortgage can be intimidating, remember that lenders want your business! You are the customer, making one of the biggest purchases of your life. Companies you consider should be responsive, professional and helpful as you start sizing up your options. There are many advantages to working with a lender that has a local presence. They will have connections with the other businesses and government organizations involved in the purchase, and will know "how to do this" in your particular state and locality. A local presence also helps the lenders personnel be up-to-date on home values and conditions in the area, which could potentially be a factor in your search. Companies without a local presence should not automatically be rejected. Your communication preferences and record-keeping habits might make a national lender with a robust digital loan-processing system a fit. You should be comfortable with calls and video, rather than face-to-face conversation, if that looks like a fit. Advice from friends and family may be helpful, but keep this in mind. People do not buy homes as often as they buy groceries, or even cars. Verify the advice you receive with your own homework, online research, and feel for the situation.

This video outlines what to expect after youve applied for a mortgage loan. There are 6 required pieces of information for a mortgage loan application, covered in another video here on Video-Genius. Some lenders may request additional information at the time of application, or later. Once you have supplied the 6 required pieces, lenders have to provide a Loan Estimate in 3 business days. Lenders will verify the information you provide, through actions like credit checks, credit history and employment verification. Most lendersmust follow these steps, to assess your ability to repay. (Dont be offended by verification — it is required.) Once information has been verified, and processes like underwriting completed, the lender will make a decision about loan approval. If the loan IS approved, they will deliver a Closing Disclosure detailing all of the costs and terms. If you have a Closing Disclosure already, there are videos here that cover all of the pages and details to help you make sense of it. The Closing Disclosure itself must be delivered to you, 3 business days prior to consummation of the loan. The lender will usually set a date for that loan consummation process; this may also be your closing meeting. For clarity — closing essentially means "transferring ownership", and consummation basically means "committing to the loan." Once you have completed both of these, take a breath and pat yourself on the back! Successfully buying a home is a big milestone. Hopefully you remembered to get the keys so you can start transforming "the property" into your home.

If financial circumstances arent working, and you are falling behind on mortgage payments, hoping the lender wont notice isnt a solution. Talking with them about loss mitigation options is better. Lenders may be able to arrange a "workout package" to help get things back on track. Mortgage loans are often "sold"; the lender who is servicing the loan — the lender to whom you send checks — has the financial interest in your situation. Talk with that lender, not the original lender. If Fannie Mae or Freddie Mac — both government-sponsored enterprises involved in mortgage lending — have acquired your loan, there are Federal guidelines that they may apply to your situation. They are not there to deal directly with borrowers (you), but they may be able to work with the lender of record to determine the loss-mitigation guidelines that best fit your situation. Be vigilant about companies that "just want to help". Look out for: Financial counseling agencies with high fees; they may be charging for advice you can get for free. Equity Skimming — companies (or individuals) who offer to repay the mortgage or sell the property if you sign over the deed. And do not sign anything related to your home until you understand it thoroughly.

Mortgage insurance is a policy that covers the lender in the case of loss. For some borrowers, the FHA (Federal Housing Authority) provides mortgage insurance. For other borrowers, a policy from a private mortgage insurer (PMI) may a better option. PMI companies usually have larger down-payment requirements and more-stringent qualification guidelines than the FHA. They may also cover loans that are large than the FHAs limits. Premiums from these lenders are often lower than FHA premiums, though. Most lenders will have guidelines and information about PMI options, for situations where mortgage insurance will be required. Ask your lender if PMI is an option for your situation.

The term "mortgage insurance" can be a bit confusing; this video might help. Mortgage insurance covers thelender, not the homebuyer, but mortgage insurance premiums are paid by the homebuyer. Confused? Read on. If a home buyer cant make a large enough down payment, the lender is taking a bigger risk that they might not be repaid. Its a silly example, but if you made a $1 down payment on a $1M dollar house, you wouldnt have a very big reason to stick around if market conditions or personal situations go bad. In general, if the down payment is under 20% of the loan (including that $1 down payment), the lender wants insurance that they will be repaid. So you, the buyer, agree to pay mortgage insurance because the lender is taking a bigger risk. If the borrower cant repay, the lender might foreclose on the property, and file a claim with the mortgage insurer for losses. If mortgage insurance comes up in your loan shopping, ask about FHA programs; there may be options that help you. If you do take a loan that requires mortgage insurance, keep track of your equity. You will probably have the option of dropping mortgage insurance when your equity is high enough.

The month-to-month home mortgage payment primarily pays off principal and interest. Many loan providers likewise consist of regional real estate taxes, homeowners insurance coverage, and home mortgage insurance coverage, if appropriate. If you are re-financing compare what is and isnt consisted of in your funding alternatives. View this video and it should make sense.

Understanding the building-blocks of a mortgage may help you compare your options. Your monthly payment is based on a complex calculation that changes over time, so "getting the picture" can be tricky! The biggest pieces are: Loan Amount Interest Rate Term (years to pay off) Payment Schedule Down Payment Equity Down payment and equity are of course closely related, but remember that your equity changes as loan payoff proceeds. This short video visualizes the way these factors relate to help you make sense of the math.

The down payment on a home affects many things — what home you can afford, loan size, financing terms and more. Getting some sense of the down payment you can afford can be difficult; people are quick to share advice from their experience, but conditions may have changed. In general, the higher the % of the purchase that you can cover in the down payment, the better the loan terms as a whole are likely to be. 5% of the home is currently the minimum down-payment amount. Keep in mind that any amount under 20% will generally require a mortgage insurance policy, which does increase borrowing costs. Keep in mind that the down payment is not the only sizable payment involved in buying a home. You will also need cash for closing expenses, moving, decorating, furnishing and possibly repairs. Check your credit history when youre sizing up down payment and loans; its also a vital part of the equation.

The term "mortgage" is commonly used to refer to the loan someone obtains to buy a home or property. Technically, the loan is one part of the arrangement. The other — the mortgage itself — is a legal claim (a "lien") that gives the lender rights to the home or property used as security, until the loan is paid off. The loan component of the financial package has two key features you should understand. Principal — the amount you are borrowing. For the lender, risk is balanced by their lien on the property. Interest — the additional amount you are paying, over time, to borrow the principal. Because mortgage loans usually take years to pay off, understanding that interest is compounded — "interest on interest" — will help you make sense of the total cost of the home. For fun — the roots of the word "mortgage" are death (mort) and pledge (gage). It captures the long-term promises involved in buying a home.

Home mortgages are for completed homes, not construction projects. But construction projects may become completed homes, so there is a loan structure designed to cover construction, and convert to a mortgage at the appropriate point. These are commonly called "construction perm" loans. Loan terms during construction are frequently based on variable rates, and provide scheduled cash disbursements — "draws" — to match the stages of construction. When the home is legally complete-enough to qualify for a Certificate of Occupancy (CO), the loan is converted to a mortgage. Construction perm loans have the advantage of a single application and closing, and dealing with a single lender. If you are considering a construction perm loan, compare interest-rate trends to your construction schedule. Assume construction delays. Evaluate if a rate-lock on the mortgage stage looks advantageous. In addition, weigh the short-term cost of the construction-perm arrangement against your mortgage rate and its long-term costs.