The Legalities in Applying for a Home Mortgage

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As a first time home buyer, you may be overwhelmed by what seems to be the infinite amount of legalities associated with applying for a home mortgage. It's crucial that you have knowledge regarding your rights as a borrower so that you ensure you are being treated fairly from the beginning until closing day.

In this article we'll explore some important terms, the steps involved in applying for a home mortgage, and your rights as a borrower. Check out the mortgage compliance here.

What is a Mortgage?  

A  mortgage  is a form of debt that you incur when purchasing a home by providing collateral to secure the loan. It's often described as "buying on credit" because you are essentially borrowing money from a lender, which you will have to pay back with interest. 

What are the Requirements for Taking Out a Mortgage?

There are many requirements that are involved in applying for a home mortgage. You'll be asked about your income, debts, credit score and more to determine whether or not you qualify for the loan. Your eligibility will also depend on whether your lender is a conforming loan carrier, which means they will follow the guidelines set by Fannie Mae and Freddie Mac.

The Different Types of Mortgage Loans  

There are various types of  mortgage loans that you apply for when purchasing a home. These include:  

FHA Loans - With an FHA mortgage you can finance up to 96.5% of your home's purchase price and the minimum down payment you'll need is only 3.5%. This type of loan can be especially appealing to first time home buyers because it often includes a low interest rate and flexible requirements that make qualifying for this loan easier. Click this link for more info related to this topic.

VA Loans - A  VA loan  is a type of home financing that is only available to veterans. If you are accepted for this loan, you will not have to make any down payment at all and the interest rate will generally be lower than what you would see with a conventional loan.

Conventional Loans - This is a traditional mortgage that doesn't include any special benefits or features. While there may be a few benefits to this type of loan, they often carry a higher interest rate making the overall cost more expensive in the long term.

In general, you'll have to put down at least 5% of the home's purchase price when applying for a conventional mortgage and must meet certain borrower requirements that may include: 

- Having an established credit history   

- Having a steady stream of income that meets your monthly debt obligations   

- Being able to show employment records for the past two years   

- Not having any derogatory marks on your credit history, such as bankruptcies or foreclosures.

To understand more about this subject, please read a related post here: https://en.wikipedia.org/wiki/Mortgage_loan.