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Mortgages 101: Everything You Need to Know About This Home Buying Process

Purchasing a home is an exciting process. However, it can be intimidating when you consider all the decisions and details leading up to closing day. 

We want to help make the process just a little easier. To do so, we put together some of the most frequently asked questions about mortgages and the mortgage process – a Mortgage 101, if you will. By the end of this blog, you’ll be even closer to getting your dream home!

  1. How do I start the mortgage process?

Before submitting your mortgage application, you’ll need to have an idea of the type of mortgage loan you want, ensure your credit report is error-free, choose your lender, get pre-approved, and assemble your loan paperwork. 

If that sounds like a lot — just hold tight. We are going to break each of these down further in the following questions. 

  1. How do I know which type of mortgage loan is right for me?

There are many types of mortgages available to choose from based on requirements, interest rates, and availability. Some of the most common are conventional mortgages, government-insured mortgages, fixed-rate, adjustable-rate, and jumbo mortgages. 

To help you get an idea of the mortgage that’s right for you, we wrote a blog on each of these types (and more!) and broke them down into their characteristics and benefits. Read about them here!

  1. Can I get a mortgage loan without a credit score?

It is more challenging to get a mortgage loan without a credit score, but it’s not impossible. As we mentioned in the previous question, you can get an FHA loan with low or no credit. However, this can incur greater costs in the long run with fees and insurance. 

If you don’t have a credit score — the best process for you is finding a lender who does manual underwriting. Manual underwriting is a hands-on process that reviews your proof of income, rental history, and other documents to evaluate your ability to pay debts. In addition to documentation, you’ll need to have a sizable downpayment (20% if possible), allowing you to get a mortgage loan — suggest going for the 15-year conventional. 

  1. How should I choose a mortgage lender?

First and foremost, do your research. What are your options? Should you check out a credit union, mortgage banker, or smaller financial institution?

Come with the right questions. The more you know beforehand, the more you are positioned to ask the relevant questions to help you make your decisions. This guide can help! Start by figuring out what type of loan(s) you are interested in and what you can afford. 

  1. What is pre-approval? How do I get pre-approved?

A pre-approval determines how much money you can borrow to purchase your home. Lenders will analyze your income, assets, and credit score to determine the type of loan you can get approved for, how much you can borrow, and what the interest rate will be. 

Pre-approval is a practical step in the mortgage process, as you can show sellers that a lender is willing to loan you the money. It makes the searching process more straightforward and can make your offer on a home stronger. 

  1. Are pre-qualification and pre-approval the same?

While they ultimately aim to reach the same goal, a pre-qualification is not as accurate as a pre-approval because it is less in-depth. A prequalification is more of an estimate because you do not have to provide as much information, such as your credit report. However, both are beneficial in giving insight into your loan opportunities. 

  1. What information should I have available when applying for a loan?

You’re getting closer and closer to locking down that mortgage loan! First, you’ll need to submit the official mortgage application through your lender. You’ll also need your ID, proof of income, tax returns, bank statements, retirement or investment account statements, rent history, credit report, and possibly a few others if specified by your lender. You may even have most of these nearby if you have gone through the pre-approval process! 

  1. Do I need to do a home appraisal and inspection? Why?

Yes! Lenders require a home appraisal before issuing a mortgage. Although it’s a worst-case scenario, they want to make sure the home is valued high enough to recover the cost of the loan if the buyer defaults on the mortgage. 

Inspections, however, are optional — but highly beneficial. It can often be the deciding factor in finding the home right for you. Here are 10 things buyers should know about home inspections!

  1. What homes can I afford, and what will my mortgage payments cost?

One of the most important factors to consider before beginning the search for a new home is your budget. You have to consider the down payment necessary for your new home and the monthly cost of the mortgage. Your mortgage payment is affected by a few factors, including your credit, DTI (debt-to-income ratio), and current assets. It also depends on how many years you want to spread the payment over. 

Once you have an idea of how much your home will cost, try our mortgage calculator! It will provide a helpful estimate of what your mortgage payment will be each month. 

  1. What does a lender look for when approving my mortgage loan?

As we have mentioned, your mortgage loan approval is affected significantly by your credit history, debt-to-income ratio, and current assets. When checking your credit history, lenders will look for:

  • Few to no recent credit applications
  • Positive payment history
  • Credit utilization (only using around 30% of your credit limit at once)
  • Being an authorized user on another account (their activity can reflect your credit)
  • Bankruptcies or other negative marks (delinquent account, charge-offs, etc.)

In addition to making sure you have a stable income, your lender will also assess how much of your current income goes to pay off debts. If this is a significant amount, the lender may determine that you are not well-suited to take on more debt, or your interest rate may be higher. 

Lastly, lenders will often want to see any bank statements or investments, as high-value assets will reflect positively on your ability to make a sizable down payment or pay your mortgage on time each month. 

Bonus Question: Can I Start Now?

Absolutely! At MortgageRight, we help people like you find the mortgage that’s right for you by securing your pre-approval letter and low rates. To start your home buying journey today, head over to our home page and click the quote or pre-approval button in the top right-hand corner. Just a few clicks will get you that much closer to the long-awaited move-in day! Do you have a question that’s not on this list? Feel free to email us at contact@mortgageright.com or give us a call at (205) 776-8401, and we will be happy to answer it for you!

Categories
Home Inspections Mortgages

Buying a Home? 10 Things You Should Know About a Home Inspection

Home inspections can be intimidating. While the seller is worried about unexpected issues, the buyer is worried that these issues may make their dream home not so “dreamy.” But worry not! We talked to expert home inspectors to gather tips on how to ensure your home inspection is a success. Read more from a home inspector’s perspective on this recent post from guest blogger and Certified Home Inspector, George Sadwoski.

1. Inspections Are Optional

Home inspections are not a requirement. However, having one can give you greater insight into issues you may not have considered. Sometimes, an inspection can even be the deciding factor for whether the home is right for you.

2. Find the Right Home Inspector

Home inspectors examine the property and inform you of potential issues. As the homebuyer, choosing the home inspector is your decision. Your real estate agent can be the best resource, but make sure the inspector’s company is insured and does not also sell home repair services, as that may present a conflict of interest.

3. Benefits Outweigh the Costs

Most home inspections will cost you a few hundred dollars. While you can compare the costs between different inspection companies, purchasing a home is a major investment  so making sure you have a thorough and expert inspector may be worth a higher price.

4. Bring a Notepad, Pen, and Camera

Attend the inspection, even though it’s optional. Not only can you hear the insight firsthand, but you’ll be able to ask questions on anything you are unsure about. You also have the opportunity to make notes on areas that you would like to focus on after buying your home.

5. Not Everything Is Included

Since every property is different, each home inspection varies slightly. Generally, as suggested by the American Society of Home Inspectors (ASHI), qualified inspectors will check the home’s:

  • Foundation and structural components
  • Basement, attic, and insulation
  • Heating and cooling system
  • Interior electrical system
  • Interior plumbing system
  • Condition of windows, doors, door frames, walls, and floors

Additional structures (ex. sheds), inside the walls, chimneys, and roofs are not always included in the home inspection.

6. Ask About the Roof

Many home inspections do not include checking the roof, sometimes due to its height and steepness, or bad weather conditions. However, it is worth the extra time and money to hire a certified roof inspector. One-third of real estate inspection claims and almost 40% of homeowner’s insurance claims relate to problems with the roof.

7. Asbestos? No Thank You

If you are purchasing a home that was built before 1980, you want to have it checked for asbestos. Checking for that, as well as radon, lead paint, and other hazards will likely need to be done by a specialized inspector, or may come at an additional cost. Even if your home is newer, checking for these hazards is a smart preventative measure.

8. Get an Inspection Report

After the inspection, the home inspector is required to provide you with a report. In this report, they should detail their findings from the walkthrough and provide any relevant photos. Review the report to make sure you have a good understanding of the home.

9. Negotiate, Reasonably

Because you have made an offer on the house but have not yet closed the deal, you can use findings from the home inspection to negotiate. You can request the seller have the repairs done, or can ask for a price reduction and do them yourself. Make sure to highlight the main issues, and aim for what is fair for both parties.

10. Don’t Be Afraid to Walk Away

If you aren’t satisfied with the results, do not feel pressured to close on a home that’s not right for you. Officially, the seller has the right to refuse to make any repairs. If they refuse or you are unsatisfied with the deal, you can rescind your offer on the home.

Whether it is your first home or your fifth, homebuying is an exciting process. Home inspections are just one important part of this journey. No matter what surprises were thrown in along the way, we want to make sure you’re ready for your home inspection, so your home is ready for you.

Got questions about matters involved in purchasing a home? We can help. Contact us at Contact@MortgageRight.com or call 205-776-8401.

Categories
Home Inspections Mortgages

An Inside Look Into Home Inspections

Home inspections are an important part of both buying and selling a home. We are featuring guest blogger George Sadwoski from By George Inspections to get an expert perspective on everything you need to know about home inspections.  

Introducing: George Sadwoski

I am a member of InterNACHI, AHIO, the Birmingham Association of Realtors, BNI, and the BBB. By George Inspections has been in business for almost five years. In that time, I have completed thousands of inspections for clients, all with 5-star reviews on my website and Facebook.

Introducing: Home Inspections

It is important to pick a reputable inspector. Use a home inspector certified as a licensed inspector with the state. Make sure your inspector is insured with E&O and Liability Insurance.

It is also important to clarify what your inspection includes. A home inspection is not a warranty for the home. It is an agreement to provide a client with a written report identifying issues the inspector observed, and problems deemed defects. These comments will not comprise the report. They are supplementary to the seller’s disclosure. 

An inspection is a non-invasive and issues fall into four categories:

  • Major defects, such as structural failure
  • Issues that can lead to major defects, such as a small leak on the roof
  • Things that may hinder your ability to finance, legally occupy, or insure the home if not immediately rectified
  • Safety hazards, such as exposed or live bus bars

Most sellers are honest and are often surprised to learn of defects uncovered during an inspection. It is important to realize that sellers are under no obligation to repair everything mentioned in an inspection report. No house is perfect, so keep this in perspective as you move into your new home.

Safety First

When performing an inspection, the inspector must first look out for his or her safety. If they see or detect mold, they are required to back out of the area and inform the client of the situation, as it can be very serious to them and the homeowner. If a roof is too steep or wet, I use binoculars to visually check the roof from a window. We also use drones to inspect hard to reach areas. This also avoids causing additional damage to the roof by walking on the shingles and abrading the sand from the shingles.

Crawl spaces and areas of confinement are tough to inspect, but I have a self-propelled robot crawler with cameras and lights to get into tight and confined areas. We have to look out for spiders, rodents, especially in these areas. Attics can be tough due to potential hazards like low headroom, deep insulation, and faulty wiring. 

An inspection is supposed to be non-invasive, meaning a lot of inspectors do not pull panels from electrical panels, but I always do a visual inspection to assess the gauge of the wiring, breaker amperage, and to see the amperage rating of the service.

A home purchase is one of the biggest investments most people make in their lifetime, and it is important to have an inspector that is certified. 

Remember my tag line, “Anyone else is just looking around.”

By George Sadowski
www.Bygeorgeinspections.com
205-907-4732