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Tutorials - What is a Mortgage

Credit Information

Credit Score
Credit Assessment
Credit & Bankruptcy

What is a mortgage?

Choosing a Mortgage

Rent or Buy?

How Much can I Afford?

Locking a Rate

Loan Types

Conventional
Conforming
Jumbo
Fixed
ARM
Buy Down

Loan Documentation

Introduction

A primary home mortgage loan is simply a loan that is secured by real property. Your mortgage payment can include principal and interest, or you can arrange to include a specified amount for an escrow fund from which taxes, homeowners insurance, and special assessments are paid. Generally, mortgages must be repaid in 10 to 30 years.

Mortgage Alternatives

You have two alternatives for applying for a mortgage:

The traditional option, where you meet with a mortgage broker or loan officer at a bank or mortgage company and that person takes you through the entire process.
The Web-based HomeLoan.com option is an online mortgage lender and mortgage broker. You can explore the various mortgage programs, learn about the mortgage process, and use the free calculators to help you decide how much you can afford and which mortgage options are best for you.

Prequalification

To prequalify for a loan means that based on preliminary information about your income, assets, and financial obligations that you provide, you seem to be a good credit risk. You can receive a prequalification letter, which will tell a realtor or potential seller how large a loan of a particular type that you qualify for.

After you know how much loan you can qualify for, you can print out a prequalification letter. When you show this letter to a realtor, you'll be taken more seriously as a buyer.

BOTTOM LINE: This will give you the edge over a prospective buyer who is not prequalified!

Preapproval

Preapproval means that the lender has received your credit application and proof of income, asset, and liability. With the information that you provide, your broker will have two questions in mind. Do you indeed qualify for the type of loan that you want, and will your application pass smoothly through the underwriting process. With a preapproved loan, you can close the loan quickly.

BOTTOM LINE: An anxious seller will sometimes reduce the asking price for someone who is preapproved and can close quickly.