Mortgage FAQs.

A mortgage is a loan used to buy a home. It’s a legal agreement in which a mortgage lender pays for your home in full with the expectation that you’ll repay them (with interest) over a certain time period. Mortgages enable purchasers to acquire homes even if they do not have all of the funds available to do so upfront.

A pre-qualification is your mortgage adviser’s assessment of your capacity to purchase a home. It is calculated using your credit score and some other self-reported information. Pre-qualification will help determine which loan program is ideal for you and how much you can borrow.

A pre-approval formally certifies how much you can borrow. Your income and asset documentation are subjected to a more formal review. You can take a more serious look at buying a house after you’ve been pre-approved. If you are unable to obtain pre-approval, your adviser will be able to provide some useful advice on improving your credit score, lowering your debt, or overcoming any other financial difficulties that disqualify you from purchasing a home.

Three principal factors come into play when being approved for a mortgage:

• Credit score. Most loan programs have a minimum credit score requirement to qualify. Higher credit scores can allow you to qualify for lower interest rates, too.
• Down payment. Some loan programs require you to pay a certain amount down.
• Debt-to-income ratio (DTI). Your debts should only make up a certain percentage of your income because you’re about to incur a significant and important debt by purchasing a home.

Be prepared to provide proof of where you work, your income, any debt you have, your assets, and how much you plan to put down on your home.

Most homeowners should strive for a mortgage payment at or below 30% of their gross household income. Use our mortgage calculator to get an idea of your total monthly cost. The cost consists of the principal, interest, taxes, and insurance.

With so many home loan options available, it can be hard to know how each would impact you in the long run. We can help you choose the right loan option for your goals.

Because mortgage interest rates fluctuate daily, locking in your rate is a crucial step in the mortgage process. This will ensure a specific interest rate for a set period of time, typically between 30 and 60 days. You may lock in your interest rate once your original loan is approved. Most purchasers, however, wait until they have selected a specific home to buy and are formally under contract.

The typical monthly mortgage payment includes:

• Principal
• Interest
• Homeowners insurance
• Property taxes
• Private mortgage insurance (PMI), if you put down less than 20% on your home

That’s up to you. While a 15-year mortgage will save a lot on interest compared to a 30-year, the monthly payments will be much higher. A 30-year mortgage would allow a family to move into a larger home and still afford the monthly payments. Your mortgage adviser can help you compare the pros and cons of both options.

The average time to close on a house depends on factors, such as your loan type, your financial situation, and the length of your contract.