How to Prepare and Apply for a Mortgage

When researching which mortgage is suitable for you, it is important to understand how lenders operate. Your credit score can be the single most important aspect of your application that any potential lender considers. We have some tips on preparing for your mortgage application prior to speaking with a lender.

Prior to speaking with a lender, obtain a copy of your credit report and score. It is imperative your credit report is accurate and reflects only applications made by you. If you notice any anomalies such as credit applications that you didn’t make or an address that you don’t recognize, report it immediately to your credit agencies. These false records can negatively affect your credit score and ability to borrow. It is important that when you present this information to any potential lender, it paints an accurate picture of your financial history and position.

Be prepared for a lender to require you to obtain a title search and title insurance over your property. Title searches investigate any undisclosed financial claims held over your property such as a lien from unpaid creditors. Once this has been completed, title insurance can then provide security to your lender that should any undiscovered claims be presented after you take possession of the property, the issuer will honor these claims.

Steps to Apply for a Mortgage

Find out if the lender requires that you make an application fee payment to cover the costs of the process. If so you will need to pay it.
Complete the loan mortgage form. This will ask for information such as your income and other questions about the property you want.
Turn in all the information that the mortgage lender requests of you. These are mostly all personal documents such as social security number, pay stubs, bank account balances etc.
Get a title search. At this time they might also ask for the title search of the property and such information, to make sure the acquisition of this property will be done in a legal and non-fraudulent manner.
After you turn in the application and all the documents required with it. Then, it is likely that the mortgage lender will require that you go through other processes, such as getting a credit report, and a title search of the property. Other things they normally require are; that you get an appraisal of the property and an inspection for pests. They will also need to determine if the property you want to buy is in a zone that is prone to flood hazards.

After all your information, and documents have been revised and considered. The institution or lender that you applied to will make a decision based on all of the paperwork you submitted and their investigation. They may ask for more information to supplement the information already given, they may accept or offer you a different amount to that which you petitioned for. If they decline your request then by law they must give you a written information regarding the reason for their negation.

If you are ever talking to somebody who tells you that the mortgage process is simple and streamlined then you’re talking to somebody who has never been through the process before. Not that applying for and obtaining a mortgage is impossible; there are millions of people worldwide doing it every day. But it would never be described as simple.

Know Your Fees Before You Start Your Mortgage Application

The most prominent challenge that each applicant faces is the list of unexpected fees which keep adding up as the process moves along. As necessary as they are, these fees likely aren’t explained thoroughly before you get started, leaving many applicants requiring to borrow more money just to pay the application fees. If you are about to start the journey of applying for a mortgage, Riva Title Company has some researched tips to share on just some of the hidden fees you can expect to encounter.

Establishment Fee

Also known as an origination fee, this fee can either be a set amount or a percentage of the approved mortgage amount (often including other fees mentioned below). While on the surface it can seem excessive to start paying fees before you have had a chance to move through the process, this fee covers items like administration charges, required security and insurance checks, along with any underwriting fees that the lender is required to pay.

Refinancing Fee

If you already hold a mortgage and are looking to refinance for either a new property or to add another to your portfolio, your lender will include a charge for this. This fee can vary between lender. Read the product disclosure carefully when it comes to this fee. As you will be effectively canceling one mortgage to take out another, the agreed, expected, and planned for interest charges you initially agreed to will no longer be received by the lender. Recovery of a portion of this interest may be considered when determining this fee.

Title Insurance

Title insurance is a one-time fee which provides two levels of protection. The one discussed here will be geared towards the lender. Title Insurance provides security for the lender in the event that an undiscovered claim against the property is raised against your title ownership, and in turn, their title ownership. This fee represents a thorough investigation into the history of the title of the property and a one-time insurance premium. All reputable lenders will require you to obtain title insurance, so get ahead of the application and arrange it early.

Ongoing Account Fees

If you thought that your lender’s administration fees were covered by the establishment fee, then prepare to meet your ongoing account fees. Again, these fees will vary depending on your lender. Their main purpose is to cover any administrative costs associated with keeping your mortgage active. These could be simple items such as paperwork or record keeping, right through to any fees their underwriter incurs.

Home Inspection Fees

Lenders are taking a risk that the property you are going to buy is worth the amount you are looking to borrow. After all, if you over pay for a property which a lender can’t sell for the borrowed amount in the event you default on your payments, they lose out. A lender will often require you to use one of their associated inspection services. This fee both helps the lender and yourself. The lender has their concerns of recovery satisfied, and a buyer can feel confident in the price they are paying. After all, a lender isn’t going to provide funds if the property isn’t worth it.

Early Repayment Fees

On top of your regular repayments, you and any linked owners may like to repay your mortgage faster. This is a great way to minimize the amount of interest you pay, along with helping you to own your home faster. However, by reducing the amount of interest you pay, you are also affecting the agreed income of the lender. Not all lenders will apply this fee, but it is worth asking the question during your first meeting. If you believe that you will be making additional payments during the term of your mortgage, this fee has the potential to eat up a lot of your hard earned savings.

Banking Terms

If you have begun researching your mortgage options, then you have likely noticed just how many acronyms and abbreviations there are in all of the documentation. While this can lead many soon-to-be homeowners to hire an agent to act on their behalf, with the right knowledge, any new buyer can navigate the task.

Adjustable Rate Mortgage/Variable Rate Mortage

Mortgages signed under this arrangement will often receive an initial interest rate well below the market average. This rate does not continue to maturity. Instead, it fluctuates with the market. While it can be tempting to believe that any market fluctuations in your favor will see your mortgage rate reduce equally, speak with your lender about just how low your interest rate can go, and under what market circumstances it would occur. As a general rule, this fluctuation usually occurs in the bank or lender's favor.

Co-Signer

If you are unable to obtain a mortgage for the full amount based on your situational criteria, then it may be necessary to include a co-signer. This person takes on a portion of financial responsibility for the mortgage, however specifically does not live at the property.

Co-Borrower

A co-borrower, on the other hand, will live at the property or take some type of controlling or beneficiary interest in the title of the property. If you are applying for a mortgage to purchase a house for you and your partner, this is likely the term given to 'secondary applicant.

Downpayment

This is the amount of money that you, as an applicant, will need to contribute towards the purchase of the property. It is required by most, if not all, lenders before they grant any approval. When it comes time for your application, the larger the downpayment you can provide, the better bargaining power you have over the terms of your mortgage.

Title Insurance

All lenders will need security over their investment (the mortgage/you). This security comes at your cost and in the form of title insurance in Coral Gables, FL. In the event that a claim of ownership is made against the title of your home which doesn't result in your favor, title insurance in Coral Gables, FL provides the lender with financial protection. If your lender has asked you to obtain title insurance, speak with Riva Title Company at 786-787-7888 to learn more about acquiring the required documentation to assist the assessment of your mortgage application

Escrow

Escrow is the name given to an agency or entity which holds the purchase funds until all agreed conditions of the sale have been met. Escrow is typical when an agreement to make alterations or repairs to the property is made. If the owner does not follow through with the work, the funds are not released.

Interest

You likely know what interest is. But when it comes to the interest charged on your mortgage, understand how the rate is applied. The advertised rate of interest is likely shown as an annual amount, charged monthly. This means that each month your mortgage amount increases in line with your mortgage payments to reduce it. While interest is unavoidable, be sure to read the fine print to understand how it will be charged.

Pre-Approval

Pre-approval is documentation which asserts that the applicant has met all application criteria and has been granted approval to obtain a mortgage of a certain value. The difference between this and actually having the money in your account is that interest does not begin to occur until funds have been disbursed.

Refinancing

If you have multiple loans or lines of credit and you would like to wrap them all up into your mortgage, this is known as refinancing. Most banks will allow you to include lingering debt into your mortgage. However, know that it will be included in the total price and accrue your mortgage rate interest until the maturity of your loan.

If you are in the market for a mortgage, speak with Riva Title Company in Coral Gables on 786 787 7888 about obtaining title searches and title insurance in Coral Gables. Our title insurance professionals help you get prepared for your mortgage application..