If there’s one word I know to be mildly intimidating, its “mortgage.” Many millennials, in fact, feel the same way. For those who are used to renting their housing and aren’t familiar with the mortgage process, going in blind can feel like a big deal.
A popular saying exists, though: knowledge is power. The more informed you are, the less scary it seems, and the easier the process is. To take matters into my own hands, I interviewed GLFFCU’s Loan Manager and Senior Loan Officer, Holly Thomma. She helped me break it down, keep it simple, and start with the basics. Take a look below!
To really simplify it…what IS a mortgage?
H: It’s a loan that’s secured by a piece of property, like the home you’re buying.
Is there only one type of mortgage?
H: No, it varies. Some mortgages are in-house. This means they are underwritten by the credit union and they do not rely on an outside source for approval or funding. Everything is done by that institution, including ordering all the work, appraisals, and inspections. On the other hand, there are secondary market mortgages. These loans are backed by a government entity (such as the V.A. or Freddie Mac) and often have fixed rates for the life of the loan.
Do I need to know which kind of mortgage I want?
H: No – your Mortgage Lending Officer work with you to understand your unique situation and then recommend a path that suits you the best. We’re here to guide you to the best mortgage option for your specific needs.
I’ve heard a lot about getting pre-approved for a mortgage. What does that mean?
H: Getting pre-approved for a mortgage is a great option that can help guide your new home or property search. It’s when you make an appointment to talk to a Mortgage Loan Officer to discuss your debt, credit, income, and other factors. Based on these, the Mortgage Officer can give you a mortgage range that you would qualify for (for example, $50,000-$70,000). They often back this with an official letter, so if you find a home in this range, there’s documentation on file that you’re pre-approved.
If I’ve found the perfect place, how do I even start to get a mortgage?
H: Go to your institution and talk to a Mortgage Loan Officer. They will use the price of the property, your debt ratio, income, credit score, and other information to approve the loan and then prepare a loan estimate. This sheet will be the same at any institution since it’s a government requirement. The sheet will show the loan cost, fees associated with it, and interest rates. Your Mortgage Loan Officer has 3 days to get this to you after the appointment, and then you can respond with intent to proceed or not. If you respond with intent to proceed (verbally or in writing), you are typically charged a non-refundable Loan Origination/Application fee. At our credit union, it’s $350.00.
Ok…so are there any other fees I should know about?
H: Different mortgages have different fees, but typically, you can expect an origination fee (for applying), a recording fee (to make the sale a part of public records), title work fees (to research the title history), flood determination fee, and appraisal and inspection fees. Depending on your location, you might have a water testing and / or septic testing fees too.
Am I really going to have to put thousands of dollars down?
H: All mortgages have different down-payment requirements and can range in percentages required. The more money you have set aside for a down payment, the easier the process is, because it helps cover costs, fees, and incidentals. Ideally, you have 20% to put down. Of course there are options, though.
This sounds like a long process. How long is it going to take me?
H: At a minimum, you can expect the mortgage process to take at least 45 days. Any problems that come up in the process can add time, though. For example, there might be issues with the title, a delay in the appraisal or inspection, the seller may need to make improvements to the property, or one of many other things. It’s hard to put an exact number of days on the time it will take, since each home and property is so different.
When I “Close” on a mortgage, what am I actually doing?
H: At the end of the mortgage process, you’ll meet with your Mortgage Lending Officer and sign documents, receive the keys, and wrap up the process. It’s the last step before you officially own your new home or property.
Is there anything else you’d like to share about obtaining a mortgage?
H: Have patience during the process and understand that incidentals might come up that delay closing. It can be a very exciting time, and your home can be your biggest asset. It’s always recommended to have a home inspection if it’s not required so you, as a buyer, can understand improvements that need to be made to the house. Lastly, remember, the Mortgage Loan Officers are there to help and guide you through the process. Ask a lot of questions and make sure you understand what’s going on.
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