Mortgage
is one of those words that evokes positive and negative feelings simultaneously.
We hate having to have a mortgage but we love the idea that someone is willing to loan us money to purchase a home.
There has been a lot of bad
publicity this year and last about mortgages and mortgage companies who helped people move into homes they couldn't afford,
only to have their home and their lifestyle put in jeopardy a few years later.
A Mortgage approvalis something that
it is never too early to obtain. There are three different parts to mortgage approval. You will find samples of each
of these on my TOOLS page
Pre-Qualification - This is a qualification only in the sense that it can give you
an idea of how much of a home you should shop for. A lender may issue you a letter at this point stating your qualification
but the letter will state that it is based on self-reported, non-verified data. This document is often confused by consumers
as showing a mortgage approval but in reality it has no value whatsoever in the actual purchase of a home.
Pre-Approval - This is a letter that is written by a lender stating that based
the information you provided AND THEY HAVE VERIFIED, they will lend you a certain amount of money for the purchase of a home.
There will be specific conditions in the letter that must be met such as providing a contract of sale for the home, once you
find it or that there will be no change in your financial condition prior to the loan. Other conditions may be specified.
This letter will be presented, by your Realtor, to the seller of a property that want to purchase. It demonstrates to
the seller, that in addition to making an offer, you also have the means and ability to actually purchase the home.
Acquiring a pre-approval letter from a lender does not cost you anything, and it does not olbigate you to use that lender
when you do apply for a mortgage.
Commitment Letter. This letter is issued
by your lender once you have selected and negotiated the purchase of property and you have gone through the steps necessary
to apply for the actual mortgage. It is specific to the property in question - in other words, the commitment letter
is unique to a specific loan for a specific person who is purchasing a specific property. The conditions that will have
to be met will typically include an appraisal of the property as well as other conditions.
Mortgage Costs are an issue that often create confusion and worry for home buyers. The first time you go through
the process it can seem daunting. When you apply for your mortgage, your lender will provide you with a Good Faith Estimate of closing costs. This will give you an idea of exactly how much you'll
be putting out of pocket in order to purchase the home you have chosen. The estimate will include not only the costs
that your lender may be charging but ALL charges that you'll be liable for at your closing.
The form will visually be a little different from lender to
lender but it should contain basically the same information as the sample below. Even after reading the description
and looking at the sample, it may still seem like a lot to absorb. Your lender will be more than happy to go over
it with you line by line until you are comfortable.
This Mortgage Calculator will help you estimate
your monthly payments on loans, using various scenarios. Put in different amounts, loan length, and interest rates.
Click the Calculate
button and you'll see what your monthly payment will be.
Click the Amortize button you'll see a table showing how much of the loan you'll have
paid off after each year. This information can be very valuable for long-term planning - if, for example you know that you'll
be moving again in 5 years - the amortization table will tell you approximately how much you'll still owe at the end of
that time.
The tax savings calculator allows you to put
in various parameters and estimate what you will save in income taxes as a result of the interest you'll be paying on
a mortgage. This is especially important for first-time home buyers or people who are renting now.
This calculator will help you do a comparison between
renting a home and purchasing. It will show the savings (or increase) in your total payments based on how long you plan to
own the house.
Rick Schwartz, Realtor ®
William Raveis Real Estate 48 Mill Plain
Road Danbury, CT 06811
