Everything You Need to Know About Mortgages
Want to know the secret to finding your dream home? Planning. Before you ever start your home search, it's a good idea to understand your financing options, especially if you're buying your first home. We have all the mortgage information you need to know!
With so many loans out there, how do you decide which one is best for you? It all depends on your credit score, your financial history, your budget, and your future plans. To help you make the best decision, we've outlined the most common types of loans out there.
Types of Home Loans
Fixed-rate mortgage: Since the interest rate for this type of loan doesn't change, fixed-rate mortgages are great options for buyers who want consistent payments each month.
Adjustable-rate mortgage (ARM): This type of loan offers a lower initial rate but adjusts with the market after a certain amount of time. With a 3-year ARM, for instance, your rates will adjust every 3 years after the initial rate period ends.
Conventional mortgage: This is the type of loan that most buyers think of when they hear the word "mortgage." A conventional loan requires good to excellent credit and a down payment of at least 10%. You may need private mortgage insurance if you pay less than 20% down.
Veterans Affairs (VA) mortgage: Veterans and active military service members can qualify for a VA loan. These loans offer up to 100% financing, simplified loan approvals, and lower interest rates.
FHA mortgage: Like VA loans, FHA loans are government-insured mortgages that offer low down payments and lower interest rates.
Don't wait until after you find a home to shop around for loans. You don't want to lose your dream home because you don't qualify for the amount or because another buyer secured financing before you! Instead, get pre-approved for a loan before you start your home search.
During the mortgage pre-approval process, your lender will review your financial information, including your credit score, and tell you the maximum amount of financing the bank will give you. Knowing this information will help you when you make an offer, since the seller will see you as a serious buyer.
What Your Lender Needs to Know
When you talk with a lender about getting pre-approved for a mortgage, they need as much information about your financial and work history as you can provide. Here are a few documents and answers that you will need to bring to your meeting.
- Amount of time and money: How much do you want to borrow and for how long?
- Important documents: These include your Social Security number, pay stubs or W-2 forms, and account statements.
- Work history: Bring a list of all of your recent employers and their contact information.
- Financial history: This includes your gross monthly income, any assets you have (including stocks, bonds, and other properties), and any debts you have.
Since we've helped many buyers find a home in the Washington, DC metro area, we've built a large network of trusted service providers, including mortgage lenders. We're happy to connect you with a trusted local mortgage provider — just call us at (301) 775-4196 and we'll give you a list!