Loans
The Loan of Loans: Home Mortgage Financing
It’s the bracing reality of any home purchase. At some point, you’ll have to talk money. Financing. Interest rates and other terms. Escrow. Insurance. Equity. And the papers – sign this to verify that your initials mean the same thing as your signature. Initial here to confirm that your understand that your signature must be used instead of your initials. This form says that you understand you don’t need this form, while that form explains that you waive your right to approve more forms like this.
There’s nothing quite like a home mortgage. No matter how many loans you’ve taken out and repaid before, none really compare to your first experience with mortgage financing. It can be the culmination of one of the most exciting searches and biggest decisions you’ll ever make in your life, while at the same time leaving you a bit overwhelmed at the commitment you’re taking on and intricacies of the entire process. That’s OK – you’d be surprised how many others feel the same way at first. You’re probably going to be fine. This is the perfect time to take a deep breath and educate yourself a bit on just how much control you actually have over the home mortgage experience.
Your top mortgage lenders, however, want something a bit more precise. That’s where the mortgage appraisal comes in.
An appraiser starts with much of the same information as a CMA, but he or she doesn’t stop there. They walk the property inside and out, documenting specific features, amenities, problems, or potential shortcomings. Real estate agents are talented professionals with many skills, but their primary function is to facilitate deals between buyers and sellers. Appraisers aren’t paid to make deals. Their primary function is to determine the precise dollar value of a specific property and produce detailed documentation of each factor used in that determination – foot by foot and room by room – usually on behalf of the lender or potential lender.
Until recently, the only way to access these reports was by commissioning a professional appraiser. This is rapidly changing, thanks to accūRATE. Imagine having access to detailed reports from certified appraisers available for any property you’re considering, in whatever format you find most useful and through any connected device. Imagine eliminating the guesswork from CMAs, home walk-throughs, or price negotiations. Technology can’t replace human decision-making, but it can do amazing things with information management, storage, retrieval, and analysis. In other words, accūRATE won’t tell you which home to buy, but it can reduce many of the uncertainties and much of the stress of the decision-making process.
Why wait for your local Mortgage Center or favorite online mortgage lenders to tell you what your property or potential new home is actually worth? Why estimate when you can accūRATE?
+ Mortgage Loans 101: Preparation and Knowledge
The process of investigating mortgage options should begin well before you get serious about looking for a home or other property to buy. Because of the amount of money involved, it’s best to seek pre-approval for whatever types of home loans you’re considering.
This allows lenders to run your credit and establish an accurate idea of how much they’re willing to lend you, and on what general terms. With this information, you can shop with specific price guidelines in mind. If you choose to make an offer, sellers know you’re serious and have the ability to follow through quickly if they accept your offer, which strengthens your negotiating position.
Experienced, top mortgage lenders won’t just investigate your credit history and your ability to pay, however. Before final approval, they’ll commission a detailed mortgage appraisal of the property in question. If you’ve bought or sold a home before, you’re probably familiar with the Comparative Market Analysis (CMA) most real estate agents use to estimate the value of specific homes. The CMA uses information about the property to find similar homes in the area which have been bought or sold in the previous six months or so. Realtors look at how long these “comparables” were on the market, how much they sold for, etc. The goal is to provide some general guidelines as to what can be expected with the property you’re buying or selling.
+ Mortgage Loans 102: Use Available Tools
We live in weird times socially, politically, and economically. At the same time, we have access to more information (and in more forms) than ever before. Maybe we can’t make the rest of the world more cooperative or rational, but we can make our world more informed and ourselves better prepared. There’s no excuse not to compare local lenders with the many reputable online mortgage lenders out there. There’s no reason not to know current average mortgage rates and how your credit score impacts your ability to do just a little bit better. It’s just a matter of deciding to do it.
If you’re seeking pre-approval on anything from a home equity loan to a construction loan for remodel to a renovation mortgage to refinancing to lower your interest rates, we want to provide the tools and connections to quality lenders that put the control back in your hands. Even if you’re pursuing something less traditional - private real estate loans, jumbo loans, FHA or VA loans – our goal is to help you clarify and claim your goals.
Powerful and flexible, intuitive and easy to use, accūRATE also simplifies the jobs of real estate agents and home lenders, whether we’re talking about your local bank or Mortgage Center or the many reputable online mortgage lenders who’ve become such valuable options in recent years. Thanks to existing mortgage technology, I have easy access to online mortgage calculators, the ability to easily check credit scores and reports, real-time updates on housing loan interest across my region or across the country, and 21st century access to a wide variety of mortgage options. I can compare home loans near me, then visit Loanry to get connected to reputable online mortgage lenders who best match my circumstances and my needs.
The Language of Loans and Mortgages
Like any field or profession, realtors and mortgage lenders have their own vocabulary. Even if you already know the basic definitions, it’s worth revisiting several of the terms you’ll hear thrown around freely during the process.
Accury
At Accury, and across the Goalry family, one of our guiding convictions has always been that most of us can take far more effective control of our personal and small business finances if only given the right information, tools, and opportunities. When it comes to buying or selling a house with a mortgage, we have information, insight, and tools to make the process easier and more efficient.
+ Loans vs. Mortgages
A loan is any agreement between a lender and borrower in which a lump sum is provided by the lender up front in exchange for repayment plus interest (or other fees) by the borrower over a set period of time. Home loans, vehicle loans, student loans, personal loans, loans to pay for weddings, vacations, or medical bills – only the amounts and repayment terms change.
A mortgage is a specific arrangement in which you’re allowed to occupy a home or other real estate while you pay for it over time. The property acts as collateral, meaning you don’t fully own it until the last payment is made. The lender retains the right to take it back at any time if you’re unable to keep up with your payments. Mortgages allow folks with decent credit and reliable income to afford homes they’d never be able to consider if required to save up and pay for them in cash. They keep interest rates low and provide incentives for lenders to compete for your home mortgage business.
Because the property itself acts as collateral, home lenders have substantial motivation to make sure the property has a value equal to or greater than the amount borrowed. They don’t want a time at any point during the repayment process in which the value of the property dips below the balance owed on the home. Sometimes the difference between getting approved for the home of your dreams or being politely encouraged to consider something more in your “range” is your ability to establish the appraised value of the property accurately.
+ Other Terms Associated with Home Loans
- Principal: This is the amount you actually borrow to buy your home before fees or interest are added. When a homeowner wants to see how close they are to paying off their mortgage, they often look at both the total remaining payments and how much is owed on the principal of the loan.
- Interest: At its most basic, this is the cost of borrowing money. It’s usually figured as a percentage of the principle multiplied over the time it takes to repay, but this doesn’t capture how many different ways interest can be calculated. It’s usually best to utilize an online mortgage calculator if you want reasonably accurate projections.
- Fixed Rate: The interest on your loan is “locked in.” It stays the same for the life of the loan, meaning that unless there are other factors altering the amount of your payments, your installments stay the same each month.
- Adjustable Rate: The interest on your loan is based on market rates, which rise and fall over time. Adjustable rate interest is often lower than fixed rate when the loan is initiated and “locked in” for a set period (five years is common, but not universal). After that, your interest rate might rise, fall, or do a little of both.
- Equity: The amount of your home you “own” expressed as a dollar amount. If you have a traditional thirty-year mortgage, for example, and you’ve been making regular house payments for a decade or more, you’re still a long way from paying off your mortgage. At the same time, you’ve paid enough that it’s reasonable to credit you with “owning” a percentage of the overall value of the property. In literal terms, it makes no sense to think of owning a percentage of your home – what good is half the kitchen, a bathroom, and two-thirds of a master bedroom without the rest of it? In financial terms, however, it means you have equity available for use as collateral.
- Amortization: This term can mean slightly different things depending on the context in which it’s used. At its most basic, amortization refers to the time period in which your debt gradually goes down as you make payments towards ownership. When referring to home loans, it generally refers to the most common structure for how mortgage payments are broken down over time. Your first mortgage payment impacts the principal of the loan very little and is applied almost entirely to interest. The next payment covers a slightly larger bit of principal but still mostly pays interest. Over time, more of your mortgage payments go to the balance of your principal and less towards interest on the loan.
COMMON TYPES OF MORTGAGES AND HOME LOANS
The most common sort of home loans are exactly what you’d expect – individuals or couples who wish to purchase a home in which to live. There are, however, numerous other reasons to start hunting for the best mortgage companies in your area or researching the most competitive online mortgage lenders.
One of the most popular is refinancing. Most refinancing loans are initiated in order to reduce housing loan interest. If your mortgage has an adjustable rate of interest (most mortgages do) and the rates have gone down since you first financed, it’s sometimes worth rebooting the loan at a lower rate. The paperwork is very much like buying a home from scratch, and there are similar paperwork fees and closing costs. Given how much of an investment many homes are and the huge difference in what you’ll pay over time with even a fraction of a percentage change in the interest rate, however, it might be very much worth it.
Home equity loans are a special type of mortgage in which you use the portion of your home which you’ve already paid for as collateral. This allows you to borrow higher amounts than you could otherwise at reasonable interest rates because your home acts as security (just like with your original mortgage). Most home equity lenders will insist on a current appraisal and much of the same sorts of paperwork and documentation you did when taking out your original mortgage – and for the same reasons. They don’t want to lend more than the amount of your home you own is worth.
A renovation mortgage is a specialized form of home financing which allows you to buy a property in need of serious repair or remodeling by adding the cost of renovation to the purchase price of the home. The requirements for qualifying are fairly strict, but if approved, the potential for a wonderful home on enviable terms is worth a little extra paperwork. Depending on your credit history and the terms of your specific renovation mortgage, you may even be able to lock in interest below current average mortgage rates.
Maybe it’s your current home that needs some serious attention. A construction loan for remodel can leverage your home’s equity, your personal credit score, or a combination of both to finance serious improvements or renovations. Once completed, the full amount can be rolled into your existing mortgage. The actual process is a bit more involved than this, but it’s one more variety of mortgage you may encounter as you explore home equity lenders and other mortgage lenders.
OTHER TYPES OF LOANS? YOU’RE NOT ALONE
Whether you’re ready to buy or sell a home, trying to pay down your debt to prepare for buying or selling a home, or simply looking to get your personal finances better under control, Accury and the rest of the Goalry network of unified finance are here with the assist. Bill consolidation loans, personal loans to wipe out medical debt, even loans to help you pay the rent while you get a few things more together. We believe in the power of information, connections, and opportunities.
We can’t make it all easy, and we won’t make the big decisions for you. But it doesn’t have to be as difficult as it sometimes seems, and there’s no reason for you to have to figure it all out alone. Wherever you happen to be in the process, let us know where you’d like to begin.
