Welcome to Your Guide for Home Loans and Mortgages
Are you ready to buy a new home, but feeling overwhelmed with the mortgage process? We’ve got you covered. Follow this guide to make the process smooth and understandable, from application to closing meeting.
Understanding Mortgages: A Basic Overview
So, what is a mortgage exactly? A mortgage is a type of loan used to purchase or maintain real estate. The borrower pays back the lender over time in regular payments that include principal and interest. The property being purchased serves as collateral to secure the loan.
Parties Involved
- Borrower: You
- Lender
Payments to The Lender
- Interest
- Principal
- Fees
Collateral
- The Property Being Purchased
Top 5 Reasons Why Home Loans Are Disapproved
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Tight cash flow; unable to prove that monthly loan amortization payment is affordable
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Poor credit history
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Unacceptable collateral
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Incomplete or insufficient documentation
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Inefficient lending officers or ultra-mega-super conservative underwriters
If you are denied a home loan, feel free to contact besthomespro@gmail.com for advice. There are remedies available to fix each issue.
Preparing for a Home Loan
Before applying for a mortgage, there are several things you need to do. First, acquire some basic knowledge about mortgages, so you feel confident about the process. Then, make sure you have the funds to pay your down payment and closing fees. Finally, complete all necessary documents that supports our proof of identity, proof of income, proof of residence and documents that pertain to the property to be financed.
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Before You Apply, You Should: |
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Acquire Basic Knowledge of Mortgages |
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Make a Firm Decision to Enter Into a Mortgage |
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Obtain Funds for Down Payment & Closing Fees |
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Complete Documents are ready for submission |
The Home Loan Application Process
Steps in the Mortgage Process:
- Application, submission of requirements and payment of processing fees
- Credit investigation and appraisal of Property
- Underwriting and loan approval
- Closing meeting with lender – Discussion of approved loan terms and conditions
- Submission of documents from buyer and seller to lender
- Pay downpayment to your seller and fees to your lender
- Loan and Mortgage Contract documentation
- Loan release and payment to your seller
Requirements for a Mortgage Loan
To be eligible for a mortgage loan, lenders will review various aspects of your finances and situation to determine your ability to pay back the loan and how much you can afford. Lenders will typically examine your income, assets, and credit score.
Qualification Requirements for a Mortgage Loan:
- Stable, predictable income proven by presentation of proofs covering the last 2-3 years
- At least 30% of gross income should cover monthly loan payments
- Enough liquid assets for down payment and closing costs
- Minimum credit score (requirements vary by lender)
- Acceptable collateral
- If applying with a local bank, ensure you do not have a poor credit history
To assess your creditworthiness, lenders will use the 6 C’s. These are Capacity-to-Pay, Collateral, Capital, Character and Credit History, Condition, and Compliance.
Loan Programs Available for Mortgages
Mortgages are not one-size-fits-all. There are several loan programs available for different borrowers and scenarios. Here are some of the most common programs:
1. Conventional Bank Home Loan Financing
The most common type of loan used for primary residences, second homes, and investment properties are the conventional loans granted by banks or financing companies which typically require a 30% down payment or equity, have a loan amount up to conforming limits, documented income that can cover a monthly loan payment of 30%+/- of gross income, acceptable collateral and a clean title, and a minimum credit score.
2. Government-Backed Loans:
- Pag-IBIG Fund: Available for members with continuous 24 monthly contributions/savings.
- SSS Home Loan: Available for agency members with at least 36 months premium contribution and 24 continuous contribution before application.
- National Home Mortgage Finance Corporation Home Program: Available through housing originators—i.e., accredited real estate developers, financial institutions, cooperatives—for economic or low-cost housing projects.
- Various Programs thru the Social Housing Finance Corporation (SHFC)
3. In-House Financing Programs
Offered by real estate developers/sellers themselves, these programs are generally less stringent than other programs.
Closing Thoughts
Obtaining a mortgage loan may seem like a tedious process, but it doesn’t have to be. Prepare yourself well, work with a reputable lender, and don’t be afraid to ask for guidance along the way. BestHomesPro is here to help you achieve your dreams. Chat with us or email besthomespro@gmail.com.
We wish you success in your journey to homeownership!