The latest data shows that 86 percent of Younger Millennials and 52 percent of Older Millennials were first-time homebuyers in 2020.
Are you thinking about joining this group? Do you know what it takes to work with a mortgage company and apply for mortgage loans?
Answered below are some important mortgage FAQs for first-time homebuyers.
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How Do I Apply for a Mortgage Loan?
To apply for a mortgage loan, you’ll start by reaching out to a mortgage lender or broker. They’ll ask you to provide a series of documents to determine your eligibility.
This list includes copies of your tax returns, pay stubs, W2s or 1099s, and copies of your driver’s license or social security card. The lender will run your credit, too, to check your score.
What’s the Difference Between Pre-Approval and Pre-Qualification?
The pre-qualification process is a basic look at your finances. It determines whether or not you’re eligible for a mortgage.
The next step is the pre-approval process, which involves a more in-depth look into your finances, including a credit check and income verification. Pre-approval shows how much you can borrow to buy a home, and it shows sellers that you’re serious about making this big purchase.
How Are Mortgage Payments Calculated?
The process of calculating mortgage payments involves several factors, including the following:
- Principal: The amount of the loan
- Interest: The fee the lender charges you to borrow money from them
- Number of payments: Payments are typically made over a 15 or 30-year term
- Insurance: Private mortgage insurance is required if you put down less than 20 percent of the home’s value
- Property taxes: Based on local tax rates and the home’s value
- Homeowner’s insurance: Most homeowners are required to insure their property
All of these factors are added together to calculate your monthly payment. You can always click for a mortgage calculator if you want to see this process in action.
Should I Choose a Fixed-Rate or Adjustable-Rate Mortgage?
Fixed-rate mortgages charge the same interest rate every month for the entire term of the loan. For adjustable-rate mortgages, the interest can vary month to month.
Fixed-rate mortgages are right for most people because they provide consistency. Adjustable-rate mortgages can be good for those who want to pay their loan off faster, though, and are confident that they can pay it off before interest rates rise.
How Long Does it Take to Close a Mortgage?
It typically takes 30 days to close a mortgage. A lot happens from the time you submit your application to the time you get the keys to your home, from credit checks to inspections and repair scheduling. This might feel like a long time at first, but it’ll go by fast.
Use These Mortgage FAQs to Your Advantage
Now that you have answers to your most pressing mortgage FAQs, are you ready to contact a mortgage lender and begin the process of buying a house?
Keep these mortgage questions and answers in mind so you can simplify the homebuying process and avoid unpleasant surprises. Check out the other real estate articles on our blog, too, for more tips and suggestions.