Know Your Home Mortgage Options

For the majority of homeowners purchasing a home means you will be applying for and obtaining a mortgage. A mortgage is simply another name for a loan. This legal agreement is between you and a lender. The mortgage agreement gives the lender the right to take your property if you fail to repay the money you've borrowed plus interest. There are a variety of lenders who serve homebuyers with each lender offering various types of loans.

The information shared here is not intended as financial advice. It is to be used as conversation-starters to discuss with your lender or financial advisor.

The Mortgage Process

There are four basic steps to the mortgage process:

1. Speak with a mortgage broker to determine your timeline, goals, and discuss your budget. Your realtor may also have suggested lenders.
2. Complete a mortgage application and provide the requested documents.
3. Get a mortgage pre-approval so you and lenders will know what much of a loan you qualify for. (BONUS: Sellers will understand you are a serious homebuyer when you come prepared with a pre-approval letter. This can place your offer ahead of other bids without pre-approval letters.)
4. Speak with a realtor and begin looking at homes.

Helpful Tips to Follow Before Applying for a Mortgage

Before you apply for a mortgage or get a pre-approval mortgage letter, try to avoid doing these things:

1. Make any major purchases.
2. Pull your credit score history too many times.
3. Agree to co-sign on another loan.
4. Open new credit cards.
5. Change jobs or quit your current job.

A preapproval letter is a document from a lender stating that the lender is tentatively willing to lend to you, up to a certain loan amount. This document is based on certain assumptions and it is not a guaranteed loan offer. By avoiding the items listed above, there will be minimal changes from the time you’ve been pre-approved and through the time the sale of the home is finalized.

Common Mortgages Loans

Three common mortgages are 30-year fixed rate, 15-year fixed rate, and adjustable-rate mortgages. Let’s learn more:  

30-Year & 15-Year Mortgages

Homeowners choose a fixed-rate mortgages because their monthly payments will remain steady over the years. The 15-year mortgage allows the homeowner 15 years to payback the loan. The 30-year mortgage grants 30 years to make repayment to the lender.

Those choosing a 15-year mortgage enjoy a shorter payback period which decreases the amount of interest paid over the life of the loan. Oftentimes, shorter-term loans have a lower interest rate because the lender is exposed to less interest rate risk than a 30-year loan.

Your lender will provide you calculations with your payments and projected interest rates so you can decide which term length meets your needs.

An Adjustable-Rate Mortgage (ARM)

The adjustable-rate mortgage begins with a low-interest rate for a set period of time. Then the interest rate will then shift to be based on current market conditions. Your lender may offer various ARM terms such as a “3-1,” “5-1,” or “7-1.” The first number indicates the number of years set for the low-interest rate and then the rate adjusts follow the conclusion of the set-years. Typically, when the rate adjusts, your monthly home payment will increase.

A home mortgage loan can be given by a bank, mortgage company, or other financial institution. As you do you due diligence in seeking a lender, don’t hesitate to ask questions and gather information about the lending process.

I’m happy to assist you with visiting homes within your budget. There are a variety of homes on the market. I’ll do my best to help you find a place you’ll be able to enjoy for many years and make many happy memories. Give me a call to get started.

Since 2004 Sara Lyn Nguyen continues to bring a wealth of knowledge and expertise about buying and selling real estate around the Houston area to those she serves. Sara is a multi-year award winning REALTOR® and relocation specialist where her clients trust her to have up-to-date information on the real estate market. She has been one of Gary Greene’s Multi-Million Dollar Top Producers, and citywide was the #2 Top Producing agent in 2020, #3 in 2021, and #2 in 2022. When it’s time to buy, sell, invest, or relocate speak with a trusted professional knowledgeable in the homes and neighborhoods of Fort Bend/Sugar Land and the surrounding region.