You’ve found your dream home and settled on a price with the buyer. Now all you need is the right financing. Before signing a mortgage application, have a conversation with your lender about the mortgage approval process. The mortgage tips on this page will give you a good starting point, and may bring up some questions you hadn’t thought of yet.
How long does the mortgage approval process take?
The typical mortgage approval process takes about 45-90 days, but it could be longer if you’re building a home. Getting pre-approved for a mortgage may expedite this process, giving you leverage over other bidders because a seller may be more likely to consider a buyer already approved for financing.
What types of mortgage rates are available?
When applying for a home loan, you can choose between fixed-rate, adjustable-rate and jumbo mortgages. Fixed-rate loans may have higher rates in exchange for a low down-payment and the security of a rate that is locked in throughout the length of your loan. On the other hand, adjustable mortgage rates are often lower but change with market fluctuations. If you’re considering a larger house, you may need a jumbo mortgage to provide you with a little extra financing. These can be structured as either fixed or adjustable and you should talk to your lender to decide which best fits your situation.
What fees should I be aware of?
Fees associated with signing a mortgage may depend upon whether you choose an adjustable or fixed-rate mortgage. Ask your lender if any of these common fees apply:
- Pre-payment fees: Some lenders may penalize you for paying off your home loan before the term ends. Be aware that there may also be penalties for canceling the mortgage approval process.
- Closing costs: These can cover the property appraisal, your credit report, attorney’s fees and more. They should be included in your Good Faith Estimate when you sign the mortgage application.
- Mortgage points: Normally these are an optional way to pay interest up front in order to get a lower interest rate. Make sure points aren’t included if you didn’t ask for them.
- Mortgage Insurance: You may have to obtain private mortgage insurance if you’re unable to make a down payment of at least 20%. There are also low down payment alternatives from the Federal Housing Administration (FHA) and 0% down payment options available through the department of Veteran Affairs (VA).
What happens to my mortgage after it is signed?
Before you commit to anything, ask the following questions about what will happen after signing your mortgage:
- How much will your monthly payments be and do they include escrow payments?
- When are mortgage payments due?
- What is the length, or term, of the loan?
- Does your lender sell mortgages to other banks and how often? (If you chose your lender because you like the representative you work with, but your loan servicing will be sold to another bank, it may make you reconsider.)
Review your documents fully before signing your mortgage
The most important mortgage tip is to have your lawyer look over home loan documents before you sign. Make sure the mortgage accurately reflects the price of the home, the rate you will be getting, how your payments will be structured and what fees you are responsible for. The closing agent will also prepare a HUD-1 statement which reflects the details of the transaction, including:
- How much the seller is getting for the property
- How much is from the borrower and the bank respectively
- What fees or charges will be assessed
Be sure to clear up any discrepancies with your lender before signing your mortgage.
Sponsored content was created and provided by RBS Citizens Financial Group.