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Mortgage 101 – The Basics

Mortgage is a word that we hear often, but not everyone knows exactly what it means and what it can do. Here’s mortgage 101.

Purchasing a home and finally mastering financial responsibility is a goal that many people have. But making the leap from renter to homeowner is a large step and one that should only be done after careful thought and consideration. You have likely heard of mortgage jargon like “points,” or “preapproval,” or “prequalification,” but what do any of things even mean? Are mortgage lenders trying to make it as confusing as possible? Rest assured they are not, and that’s why they are there–to help you be a successful homeowner. Let’s break down a few concepts with Mortgage 101 – The Basics.

What are points?

Points are the fees the borrower (you) will pay the lender when the deal is closed and is expressed in a percent of the overall loan. For example, on a $200,000 loan, 2 points means a payment of $4,000 since 2 percent of $200,000 is $4,000. The fewer the points doesn’t always mean a cheap amount as it’s based on percentage.

Prequalification?

Before you are preapproved you must first be prequalified. Prequalifying means you have done an initial lender screening. You only give the lender or bank a general picture of your finances like, debt, income, and assets. After the evaluation, the lender will give you a picture of what mortgage you can qualify.

What is preapproval?

Pre-approval means that you have already been approved by a mortgage company to purchase worth a specific amount or less. It gives homeowners proof that you are ready to buy now.

Mortgages may seem like stressful contracts to obtain, but with the right preparation, they don’t have to be! Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.