Heres a video listing the DO and DONT steps to follow in the process of getting a mortgage loan. To ensure you wont fall victim to loan fraud, make sure you follow all of these steps in the process of applying for a loan. DO: Be honest about residency; if youre not going to live in the house, say so. Be clear and honest about any questions related to your credit history. Report your finances — debt, income and everything else — accurately. Do NOT: List fake co-borrowers Change tax return figures Overstate assets or valuations Fudge employment records Provide incorrect files to answer questions Exaggerate income or investments Buy property for someone else. Of course, do not sign ANY blank documents, and be sure you have read and understood anything that you do sign. And DO keep your own records of everything.

This video and article explain which organizations are exempt from ability-to-repay laws when handling mortgages. While most lenders are required to assess a borrowers ability to repay a mortgage, a few types of agencies and organizations are not. These include: State Housing Finance Agencies Community Housing Development Organizations Community Development Financial Institutions Downpayment Assistance Providers In addition, some not-for-profit companies making relatively few home loans are exempt. Federal loans, like this made under, the Emergency Economic Stabilization Act, might be exempt. Mortgages laws are designed to help customers and lending institutions avoid risk. If you need to check on a lending institutions right to be exempted from Ability-to-Repay, inquire with the Consumer Financial Protection Bureau online, or by telephone at (855) 411-2372.

Can a mortgage be paid off ahead of schedule, and is it a good idea? Those are two separate questions. Most mortgages allow early payoff, but you should make sure you understand any payoff terms or restrictions in your specific loan. Some loans have prepayment charges. People sometimes accelerate payoff by sending extra money each month, or with an extra yearly payment. If you do this, indicate in writing that the excess funds should be applied to reducing principal. Record the payments and instructions! Whether paying off ahead of schedule is in your financial interest is a complicated calculation. If you have the ability to do it, and prepayment penalties arent an issue, you will reduce the interest you pay over time. But reducing a low-interest-rate loan by taking funds from higher-interest-rate investments may not be in your interest. (Note: Payment used against principal is not tax-deductible!) Your lender is one source of advice, but financial planning for you is not their core business. If you have the option, get advice from a financial planning professional when considering something like early payoff.

Equity is a key financial and legal term, but its not taught in school. Understanding the basic concept is very much in your long-term interest! (While equity is also used as a social term, this is just about the financial and legal sense of the word.) At heart, equity is "value owned." If you have equity in a home, or a company, you legally own some part of itscurrent value. If the value of the asset goes up, that part that you own becomes more valuable. In homes and mortgages, this idea of "the part you own" and "current value" are critical. As the example in this video shows, the value of the home changes separately from the size of the loan. You might own a $300K home today, and owe $200,000 — your equity is $100,000 in the current market. If the home is valued at $600K a few years later, and your loan principal hasnt changed (unlikely, but this is just an example), your equity would be worth $400K, and youd owe $200K. As the asset (property) value goes up, or the amount owed goes down, your equity grows. Generally speaking, assets like homes tend to go up in value over time. Equity becomes a financial tool for the owner; for example, as collateral. Because home equity is usually one of the biggest assets people accumulate, it should be treated carefully. Get financial advice before treating home equity like a giant piggy bank.

Home inspection is frequently required in the process of a home purchase; this short video explains the purpose of an "inspection clause" in a purchase offer. Under some market conditions, a buyer might include a clause that makes purchase conditional on, or influenced by, the results of a home inspection. This gives the buyer some latitude to exit from the deal, or to renegotiate, if the inspection reveals issues. An inspection clause might also stipulate responsibility, such as requiring the seller to address problems revealed by inspection before the purchase is completed. In other conditions, such as highly-competitive buying markets, a home-inspection clause might be left out entirely. Be clear on the risk that this introduces. The real estate professionals involved in the transaction will provide guidance on the decision.

As this video explains, cash committed to demonstrate sincere intent to go through with a detail is called "earnest money." Conditions and (sometimes) local customs may play a role, but an earnest money sum between 1% and 5% of the purchase price is typical. This is regarded as substantial enough to demonstrate good-faith intent. If agreement is reached through offer and counter-offer, the earnest money generally becomes part of the down payment or transaction closing costs. If agreement is not reached, earnest money is returned. If you back out of the offer/deal, you may forfeit the earnest money. Ask your real estate professional for guidance.

The Loan Estimate form addresses one of the big questions for closing: approximately how much cash will be required? Its an estimate, not a final total; heres a short list of the costs that might change, and by how much. Section A - Origination Charges should be the same amount at closing. Section B - Services that you cant shop. Closing amounts should be within 10% of the estimate. Section C - Services you CAN shop. For service providers on the list provided by the lender, the 10% tolerance limit applies. Other service providers arent bound by the estimate, but it does provide some guidance and point of negotiation for these decisions. Section E - The Recording Fees should be within 10% of the estimate. Section F, G, and H: Prepaids, Initial Escrow, and Other may vary from the estimate. Tolerance limits do not apply. These Loan Estimate figures and tolerances, plus basic loan details, Deposit Credits, Adjustments and Down Payment should serve to compute your money-on-hand requirements at closing. When assessing or comparing loans, keep these figures, ranges and tolerance limits in mind.

Mortgage transactions involve taxes, escrow funding and some pre-payments. These costs should be considered in mortgage decisions. They include: Escrow funding, which is frequently required. Escrow funding covers future annual charges such as property taxes, homeowners insurance and mortgage insurance. Recording fees, which government agencies charge for keeping records defining legal ownership. Transfer taxes, which may be levied by municipalities, counties and states for handling the transfer of ownership records. Prepayments, which can include: Homeowners insurance premiums Mortgage insurance (if required) Property taxes for some months, in advance Prepaid interest, for the period from closing to 1st mortgage payment. These costs can vary between Loan Estimate and Closing Disclosure. Ask your lender about the tolerance rules, or watch related videos here.