Mortgage and Financing Guide

Purchasing property can be exciting and overwhelming at the same time. For most people, the biggest concern involves financing such a major transaction. At this time, it is important that buyers have access to resources such as mortgage professionals and real estate agents who can guide them through the process.

In order to purchase a property, an individual often will enter into an agreement with a lending institution to provide him/her with a loan to cover a large percentage of the purchase price. A mortgage is a very common vehicle used in the purchase of a home and most Americans use this type of financing throughout their lives when they purchase property. There are several components to a mortgage, including the interest rate due on the loan (this can be either a fixed or floating rate), the term of the mortgage in number of years (usually 15 or 30) and the amount that is being financed. Using simple math, one can figure out his/her monthly payments for the term of the mortgage. If the rate is fixed, the amount for each payment period will be identical and will be comprised of two components, principle and interest.

The following is a loose guideline for a potential purchaser to follow to ensure a better, more organized house purchasing experience.

Mortgage Pre-Approval: Typical time frame is 1 - 2 days

You must know how much you can spend before you spend it. How much cash down payment you have available for your purchase along with closing costs monies are necessary details you’ll need to provide a loan officer in order to be issued a mortgage pre-approval.

There are loans programs that provide up to 100% financing for single family homes, depending upon your credit and income history. Many condominium apartments require at least 10% down payment although there are 100% financing programs available; cooperative apartments generally require at least 10-15% down payment depending on the managing board. However, every building is different.

Once you’ve met your loan officer and provided them with your financial information, they will issue you a written mortgage pre-approval certificate. You can now start shopping for the house of your dreams with confidence that you will be able to finance the transaction with affordable monthly payments.

Apply for a mortgage: Typical time frame is 4-6 weeks

Mortgage applications cannot be processed without an executed contract. Along with the signed purchase contract you will need to submit a formal mortgage application. Some banks and mortgage companies require an application fee along with a credit charge. Ask your loan officer what their policy is prior to applying. You will be required to pay for the bank appraiser at this time too.

Banks will typically require bank statements, employment verifications, and proof of income with their formal applications. The better prepared you are to provide your loan officer your financial package the quicker the turn around time for your mortgage commitment.

Receive Commitment Letter from Lender:

Once your mortgage application is approved, the lending institution will issue a commitment letter. You should review your purchase contract to verify the timeframe from contract signing in which this commitment must be issued in order to remain in compliance with the terms of your transaction.

There also may be “conditions” which may need to be met in order to be cleared to close. Review your written commitment and ask your loan officer to clarify any questions regarding conditions that may have to be satisfied.

Before closing can be scheduled a title report must be procured on the property. A search is performed for the subject property and a title insurance commitment is developed which identifies those items found in the real estate records that describe the property, who owns the property, as well as any requirements that must be met in order to issue a title insurance policy.

If an apartment is being financed, the board typically requires a commitment letter from a lender. These letters are generally the last items needed to complete a board package condo application.

Schedule a Closing: Typical time frame is 1-2 weeks

The purchase contract will specify the closing date, however, most contracts will allow for an “on or about” date. Once your mortgage commitment has been issued and all conditions cleared, contact your attorney to set the date for closing. The lawyers for the sellers and buyers coordinate with the appropriate banks on available dates and times.
The typical time frame from the time a property is found to the time of closing is 60 to 90 days.

The Agent's Resource

For many people, the most logical step toward choosing a suitable mortgage begins with their real estate agent. A good agent has connections to reliable lenders, many of whom have worked with them before. Agents often recommend lenders to their clients. For more information on getting a mortgage use the form below: