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 Securing a Mortgage Online. The thought
of a mortgage is likely to instill 2 feelings in homebuyers: Excitement (our new house!) and terror (we have to
go through the mortgage process!) The availability of mortgages online, though has, at least somewhat, tempered
the aspect of terror. Simplified application processes, email contact instead of endless phone calls and the ability
to make quick comparisons have all helped to ease some of the tension.
Some Advantages of Securing a Mortgage Online
- Time saving: Instead of having to contact numerous lenders, you can
do many of your comparisons from home.
- You can get lenders to compete for your business by using a resource
such as LendingTree, where your information from a single application is submitted to multiple lenders
to see who will give you the best offer.
- The pre-approval process generally is easy, with the submission of an
online form with your information.
- Much of the communication with the lender can be done via email, saving
the time and aggravation of many phone calls.
Compare Mortgage Offers Online
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Source
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Apply Online?
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Competing Offers?
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Quicken Loans
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Yes
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Yes
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Common Loan Types
Conventional: A "traditional" mortgage, not directly insured by the Federal Government. Most
conventional loans under $252,700 are administered through Fannie Mae or Freddie Mac (private corporations but
regulated by the government). Those loans over that amount are designated "jumbo loans" and are funded
by the private investment market.
FHA:
Insured by (but not funded by) the Federal Housing Administration (FHA), a division of the U.S. Department of Housing
and Urban Development (HUD), and designed for, in general, low- and middle-income borrowers and many first-time
buyers. There are, however, limits (which vary from county to county) on the maximum loan amount.
VA:
For those qualified by military service, the Veterans Administration (VA) insures (but does not fund) 15 and 30
year fixed as well as 1 year adjustable mortgages with lower down payment requirements (as low as $0 down) and
somewhat more lenient qualifying ratios.
No-Document ("No-doc) Loans: No-doc mortgages
are generally a wise choice for self-employed people, those who do not wish to verify their income, and those with
a brief or blemished credit history, or no credit. The benefits of a no-doc mortgage include a shorter application
process since you are not required to provide income, employment or asset documentation, as well as a streamlined
approval process because there is little subsequent verification. However, no doc mortgages generally will be at
slightly higher interest rates and are offered by fewer lenders.
The Components of a Mortgage Payment
1) Principal: The repayment of the original amount borrowed on a monthly basis.
2) Interest:
The cost of borrowing the principal amount, repaid on a monthly basis.
3) Taxes: Real
Estate taxes paid to a local government agency.
4) Insurance:
Homeowners insurance on the home. Also any mortgage insurance, which is paid to protect the mortgage company.
The total of these items is known as the PITI (Principal/Interest/Taxes/Insurance) payment.
Hints on Online Mortgages
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H
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Check your credit upfront.
This gives you an opportunity to discover--and correct--any mistakes. See the section devoted to credit reports. |
| Fixed vs. Adjustable. If
you plan to stay in the home for a number of years (generally 7+), a fixed rate may be your best option. If moving
in less time than that is a good possibility, you may want to consider an adjustable rate with its lower initial
interest rate. |
| Don't build yourself a mortgage mountain. It's fine to want the best home you can afford, but be certain
that it is comfortable affordability. Although you may find certain mortgage lenders who will stretch
your qualification ratios (the ratio of your total mortgage payment to your total income) the traditional ratios--the
mortgage payment as 28% of your income and the total of your mortgage payment plus your monthly debt payments as
36% of your income--are good basic guidelines. |
| Don't forget about closing costs. In addition to your downpayment, you will need to reserve funds for closing
costs. Depending on the type of loan and your location, these costs can range from 3-5% of the mortgage amount,
will be paid in cash at the closing and cannot be borrowed funds. |
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