03
Dec
By support
Home Mortgage Tips

Understanding the Difference Between a Mortgage Pre-qualification and a Pre-approval

Understanding the Difference Between a Mortgage Pre-qualification and a Pre-approvalIf you’re in the market for a new home and you’ve been researching mortgages, you’ve likely come across the terms “pre-qualification” and “pre-approval”. While these terms are self-explanatory in some circumstances, they are quite different in regards to mortgage financing.

In today’s blog post we’ll explain the difference between a mortgage pre-qualification and a pre-approval.

Pre-qualification: an Initial Look at Your Mortgage Options

The first – and easiest – step on the way to receiving mortgage financing to buy a home is known as pre-qualification. During this process you’ll meet with a mortgage advisor or lender who will assess your financial history including your current income and any debts that you might have. Using these numbers they’ll perform a quick calculation that suggests how much mortgage financing you might qualify for when you’re ready to buy a home.

Your mortgage professional will also answer any questions that you might have about the process, including what interest rates you may qualify for, how much you’ll need to invest in your down payment and more.

Pre-approval: A Conditional Mortgage Commitment

After you’ve been pre-qualified for your mortgage and you’re ready to start looking for a new home you’ll go through the pre-approval process. At this time your mortgage advisor or lender will take a much deeper look into your current financial situation, including pulling a credit report to assess how much risk they will have in lending you money. You’ll also complete a full mortgage application as this will allow your lender to get a conditional approval for a certain amount or range. Finally you’ll be informed about the interest rate and the terms of the mortgage once you find your new home and complete the purchase.

The Final Step: Finding the Perfect Home

Now that you’ve been pre-approved and have received a conditional commitment from your lender, you’re ready to find that perfect new home. On top of having a better idea of your price range and what you can afford, you’ll find that sellers are far more receptive to your offers as having a pre-approval signals that you’re a serious buyer who is ready to make your move.

When you’re ready to buy your new house or condo, your local mortgage professional is ready to help. Contact them to learn more about pre-qualification, pre-approval and your financing options. Enjoy your new home!

02
Dec
By support
Home Mortgage Tips

The LTV Ratio: How ‘Loan-to-Value’ Works and Why You Need to Understand This Ratio

The LTV Ratio: How 'Loan-to-Value' Works and Why You Need to Understand This RatioAre you in the market for a new home? If you plan on using mortgage financing to buy your next home you’ve likely heard the phrase “loan-to-value” or the acronym “LTV” before. Let’s take a quick look at the loan-to-value ratio including why it’s important, how to calculate it and how it can affect your mortgage.

What is the Loan-to-Value or LTV Ratio?

In short, the LTV ratio is a number that compares how much money you owe against your home with its resale value in the marketplace. A low LTV ratio indicates that you have far more equity in your home than you owe in mortgage payments; conversely, a high LTV ratio indicates that you owe almost as much as your home is worth.

Calculating your LTV ratio is easy. Simply divide the amount that you have (or will have) remaining in your mortgage by your home’s value. For example, if you own a home worth $250,000 and you still owe $150,000 on your mortgage, the calculation would be $150,000 divided by $250,000, which gives you a LTV ratio of 0.6 or 60 percent.

Why is the LTV Ratio Important?

Your LTV ratio is important for a number of reasons. First, your mortgage lender will use this figure as part of their risk calculation when they assess your financial suitability for your mortgage. If you’re only putting 5 percent of the purchase price in as a down payment you’ll have a LTV ratio of 95 percent, which is a more risky loan than one with a LTV ratio of 30 percent and thus will almost certainly come with a higher interest rate.

If you have a LTV ratio higher than 80 percent and you’re getting a mortgage from a conventional lender you’ll also be required to pay for private mortgage insurance or “PMI”. Although PMI rates generally sound quite low – in the neighborhood of 0.5 to 1 percent – they can add hundreds of dollars to your monthly mortgage payment. Note that PMI may not apply to you if you’re seeking out a government-backed mortgage from Veteran’s Affairs, the USDA or the FHA.

While the LTV ratio might seem simple, this number can affect your mortgage in a variety of ways. Contact your local mortgage advisor today to learn more about the LTV ratio and to have your questions answered by an experienced professional.

25
Nov
By support
Home Mortgage Tips

Buying a Home with a Mortgage? A Quick Guide to Closing Costs and What to Expect

Buying a Home with a Mortgage? A Quick Guide to Closing Costs and What to ExpectWhether you’re just starting to shop for a new home or you’ve already found the perfect new house and you’re ready to submit an offer, if you’re taking out a mortgage loan to cover some of the home’s purchase price you should be aware of the various closing costs you may encounter.

In today’s blog post we’ll share a quick guide to closing costs and what you can expect to pay when you buy a new home.

What Closing Costs Do Buyers Typically Pay?

As you move forward in the home purchase process you’ll incur a variety of fees that cover document preparation, inspections and other services that are required to fully process your mortgage. Your application and processing fees cover the cost of preparing your loan application and submitting it to your lender. Your credit report fee covers the cost of pulling a credit report which is used to assess your suitability for a mortgage and whether your loan is worth the risk.

You’ll likely pay an appraisal fee as you’ll need a proper appraisal of the home’s value, and you may need to pay a flood certification or survey fee depending on where the home is physically located. Additional fees that you may incur include wire transfer fees, commitment fees, courier fees and private mortgage insurance application fees.

Finally you’ll also encounter a number of closing costs that aren’t directly related to your mortgage, including insurance costs, attorney fees, property taxes, government filing or recording fees and more.

Consider Negotiating with the Seller

It may be worth asking the seller to pay some – or all – of your closing costs, depending on the offer that you’ve submitted and how strong of a negotiating position you’re working from. Trust in your real estate agent’s advice in this regard as you’ll want to avoid spooking the seller by asking them to cover costs that they didn’t anticipate.

As you can see, there are a number of different closing costs that you may encounter when you purchase a new home. An experienced mortgage professional will help you to better understand these costs and can show you areas where you may be able to find some additional savings. When you’re ready to buy your next home, contact your local mortgage professional and they’ll be happy to share some advice.