Basic Information About Mortgage Loans

Most people who buy real estate need a loan. Getting the right loan, can make a huge difference in how we buy, when we can buy, and the amounts we will pay. When finding a lender it is also important to pay attention to closing costs, rates, and type of home loan to find the best deal.

Types of Mortgage Loans

There are many different kinds of mortgage loans, ranging from no money down financing, to option arms, interest only home loans, and more. Most loans are conventional loans, FHA loans (loans backed by the Federal Housing Administration), and VA (loans backed by the Veterans administration) backed loans. With the way the Utah mortgage market has changed over the past year, It is almost impossible to get 100% financing without a Rural Housing or Utah Housing loan. The best way to find the best loan for you is to meet with several trustworthy local lenders.

The best interest rates on mortgage loans are given when you have good credit, consistent job history, and can put down a significant amount of money, usually 20%. Many first time home buyer loans have a great rate and require very little down payment, but you usually have to pay mortgage insurance (insurance to protect your lender from foreclosure).

Types of Utah Mortgage Lenders

Banks

I have found that banks rarely offer the best interest rates on conventional loans. However, they are more likely to do FHA and VA Loans, and are often the best alternative for investment properties, construction, and land loans. Local banks and credit unions sometimes have lower up front fees than do other sources.

Mortgage Brokers

Mortgage Brokers do not actually fund the money. Mortgage Brokers have a pool of different lenders to choose from, and shop around to find the best deal for your situation. Because mortgage brokers are generally unfamiliar with exactly how the different lender programs work, this method of lending has a lot more potential for complications, and postponed closings.

Pre-Approval – An important step towards moving quickly

One of the most important steps in the home-buying process is being pre-approved for a home loan. Many buyers apply for a loan and receive approval from a lender BEFORE searching for a home. This is called “pre-approval.” Just because you get preapproved with a certain lender, doesn’t mean you have to use them.

Pre-approval is especially important as our market shifts towards more of a sellers market, and many properties get multiple offers. Some other advantages of pre-approval are:

* Pre-approval can cut days or even weeks off the closing, because the lender has already conducted its credit analysis and approved you for a mortgage.

* Pre-approval strengthens your offer and negotiating position. A home seller will often choose to accept an offer from a buyer who is pre-approved for a mortgage over one whose financial picture is still in question.

* Pre-approval will determine your price range and narrow your search parameters. Based on your down payment and that pre-approved mortgage amount, you will know how much you can afford before you even start looking for a house.

There is also a significant difference between buyers who are merely, pre-qualified, and those who are pre-approved.

Pre-qualified buyers are those whose lenders have determined how much they can borrow based only on information the buyer has provided to the lender. Nothing has been verified to determine the buyer’s true creditworthiness. The buyer still must fill out a loan application and go through the lender’s approval process. It’s also possible their credit score might not be what they think.

For buyers who have been pre-approved, the lender has already done a credit check along with verification of employment and deposit. The lender’s pre-approval is a commitment to loan the buyer up to a certain predetermined amount. The only piece missing is the lender’s appraisal of the home to confirm its value.

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