Applying for a mortgage may be one of the biggest events in your life. Getting the right deal on financing on your home is vital, and there are plenty of place to run afoul of the system. Educating yourself as to what the different types of mortgages are can help you decide which kind is right for you, and then you can begin to gather the documents you will need to successfully apply for your home mortgage. This checklist can help prepare you.
There are two basic types of mortgage plans: conventional loans, and government loans. Each of these categories can include fixed rate loans or adjustable rate loans. Government loans encompass FHA, VA and RHS loans, and usually are set at a fixed rate and have strict rules and regulations concerning lending. Conventional loans may be conforming (meaning their terms and conditions meet standards such as those used by Fannie Mae or Freddie Mac), or non-conforming, meaning the lender has more discretion as to how the loan is set up In many areas, housing assistance is provided at state, county or city level. In addition, loan assistance may be provided in the form of a tax credit that reimburses a portion of your interest payment, or a grant to help make up a down payment. Most mortgage terms are set between 15 and 30 years. Longer term fixed rate mortgages have lower monthly payments, while shorter terms mean higher payments but a significant decrease in the total amount of interest paid. Adjustable rate mortgages will have a varying monthly payment depending on the current interest rate. Interest rates may depend on a variety of factors including your credit, your income, the size of your down payment, and the state of the current real estate market. Likewise, the term of your loan and its conditions can vary depending on how much of a risk your lender believes you to be. It is best to have all your 'ducks in a row' before walking into the bank or loan office and requesting approval for a mortgage.