Understanding What Goes into Your Mortgage

Understanding What Goes into Your Mortgage

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mortgageIn order to receive funds from mortgage, or a loan to purchase or improve a home, you must find a lender, complete their application and be successfully approved. The purpose of the application is to help the lender determine whether or not you are a candidate for a loan and if so, how much they should let you borrow. Even if you haven’t found the property of your choice, you can be pre-approved for a loan so when the time is right, you are ready to act.

Type and Purpose of Your Loan

Your mortgage lender will help you figure out the type and terms of loan. This includes the interest rate, the amount and the length of your loan. If you are applying for a mortgage because either you are ready to purchase a specific property, are looking to refinance an existing loan, or are looking to make capital improvements on a home; you will need to specify your reason, as well include any relevant information about the property – its address, year built, legal description, and so on.

Identifying Yourself

It is an inevitable fact of borrowing that your lender will pull your credit report when deciding the terms of your loan. Be prepared to furnish all your personal information – your social security number; marital status; date of birth; information pertaining to any prior address (or addresses – if you have lived in your current address for under two years); marital status; dependents; and even school history. Be prepared to disclose information relevant to any employment you currently hold or have held in the last five years. It is more than likely your lender will call your employer to confirm your employment. If you are self-employed, you will be required to submit prior year tax returns and personal financial statements.

Your Monthly Income, Assets, Liabilities and Housing Expenses

You will be asked the total amount of your monthly income from all sources; including your salary, bonuses, dividend income, interest income, rental income, as well as your current monthly housing expenses. These can be anything from your current rent or insurance payments, mortgage interest, taxes, homeowners association fees – really this is anything that will affect your financial liquidity as a homeowner. You will also have to report any assets you own; this includes such things as checking and saving accounts or vested retirement benefits. Lastly, you’ll need to disclose your current financial obligations or liabilities. These can be anything from student loans to child support.

For anyone who has never applied for a mortgage before, the process can be a bit daunting. Being prepared ahead of time and knowing what to expect can save you the pain of embarrassment, or loss if you aren’t approved in time to buy the home of your dreams.

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