Financing Information

Check out the information below to learn about Home Loans etc

In today's world of Real Estate there are many different options for financing a new home. We have designed our web site to try and give you as much information regarding the various types of mortgages as possible. As we lead you through the process, you will have a better understanding of how different mortgages work as well as a brief description of each of the most common types of mortgages.

When buying a home you need to make certain that you will qualify and be APPROVED for your new home loan by your lender. Many sellers will not accept an offer on their home without a good Pre-Approval letter which meets the terms of the Spokane Multiple Listing Service standard Real Estate Purchase and Sale Agreement. Sometimes sellers will not remove their home from the market until they have been provided with a written letter from the buyer's lender stating the buyer has been PRE-APPROVED for their loan. This is also why it is critical from a buyer's standpoint to meet with a reliable Lender from the start of their home search process to ensure that they will be receiving financing and will not risk losing their perfect home to an already PRE-APPROVED buyer.

Lets take a look at what a PRE-APPROVED buyer is in comparison to a PRE-QUALIFIED buyer. There is a big difference so look at both definitions closely.

Pre-approved Buyer:

The lender has reviewed the buyer's formal written mortgage application and financial records, completed a satisfactory credit report, and then approves the buyer for a specific loan amount. This approval is subject to a satisfactory appraisal of the property and title report.

Pre-qualified Buyer:

The lender takes the buyer's income, down payment, and employment background and will then qualify the buyer as an approvable buyer, contingent upon the lender approving the buyer's completed application including a satisfactory credit report and employment verifications etc.

Buyer Mortgage Information:

Before a buyer begins to look for a home, they need to determine the price range of the home they can qualify for. When figuring financing, include the down payment, loan amount and what their payments will be including: principal, interest, taxes and insurance. This is referred to as "payment including P.I.T.I."

Click Financing Definitions to learn more about home financing definitions. 

Now lets take a look at the most popular types of mortgages.

FHA and VA Mortgages: 

  • These loans are either insured or guaranteed by the government and are normally more affordable to most buyers
  • Down payments are very small or none at all on VA loans. Also the interest rates may be somewhat lower than conventional loans.

Conventional 30-Year Fixed Mortgage: 

  • The principal and interest is amortized over the length of the loan. 
  • Payments basically remain the same over the full term of the loan.

Conventional 15-Year Fixed Mortgage: 

  • This loan is the same as the standard 30-year loan except that the principal and interest is paid back over 15 years. The interest rate is normally lower. Equity will build faster. Monthly payments are somewhat higher.

Graduated Payment Mortgage (GPM): 

  • This is a mortgage with a fixed rate offering the buyer low initial payments. The payments increase by a predetermined amount for the first five years then level off.

Adjustable Rate Mortgage (ARM): 

  • The interest rate changes over time due to specific contract terms by the lender. 
  • Lenders base their interest rate on short term Treasury Bill rates. 
  • Low interest rate at the beginning of the loan. 
  • Payments normally increase over the life of the loan. 
  • In some instances payments may decrease over the term of the loan.

Choosing a Mortgage Company:

We suggest that you research the market using all the information you now have and choose a mortgage company that you feel the most comfortable with. You will want to secure a mortgage as soon as possible. As we mentioned earlier it is best to get yourself a pre-approved letter before you begin your search for a new home.

When choosing a mortgage company, you will want to compare the different interest rates and loan fees that are being offered by each company. Be sure that the mortgage company has lending programs for the type of mortgage that you will be comfortable with. Ask the company's representative how long it will take to get your loan approved. In today's market there are mortgage companies that give approvals within, a 24 hour time frame depending upon credit report and employment verifications.

How to Apply for a Mortgage: 

  • By now you should have chosen a mortgage company to work with. 
  • Meet with your loan representative and complete the written loan application. This application will ask for your assets, liabilities and employment history etc. 
  • Now that you have completed the loan application follow the next steps that your lender will follow as a guideline.

Credit Report Verifications: 

  • The mortgage company will complete a credit report on your credit history. 
  • Many mortgage companies are now using a point system when verifying credit history. You may want to ask your lender about their policy. 
  • When making your loan application be sure to notify the loan representative of any past credit problems or bankruptcy. Understand it is better to tell them about past problems now because they will show up on your credit report. Don't let them find any surprises.

Mortgage Company Orders Appraisal: 

  • Once the lender has verified that your credit report meets their qualifying guidelines they will order an appraisal for the home you are buying. 
  • You must understand that your mortgage company is making a large investment in your new home. Therefore they need to verify that the property is being sold at its fair market value in today's market. This will also protect your investment.

Mortgage Company Approval: 

  • Now that your credit report has been verified and appraisal has been completed along with all other verifications the lender will send your "loan package" to be reviewed by the underwriter. This is the person who will make the final decision in approving the loan for your new home. 
  • When your loan has been approved, by the underwriter the lender normally will issue what is called a loan commitment. This is a legal binding agreement that they are going to give you the loan. 
  • Your loan commitment will give all details of the loan including all fees and other charges, closing requirements and conditions of granting you the loan. Also included will be documents you need for closing and the expiration date of your commitment. 
  • Take time to read and understand the commitment completely. Make sure that the terms have not changed since you made your application and the loan can be assumed. 
  • If you agree with the terms and conditions of the lenders commitment your contract with the mortgage company is in its final stages. 
  • Don't forget that your mortgage company will want to check the property title report to make sure that there are no liens or other title problems regarding the property.

Down Payments, Closing Costs and Fees: 

  • FHA, VA, and Conventional Mortgages all have different requirements when it comes to the amount you will need to put down. 
  • Check with your lender regarding what your estimated closing costs will be once you have established the type of loan you will be obtaining. 
  •  Every loan has various fees that go with the loan. Review all loan fees and discount points being charged by the lender. 
  • You will receive a Good Faith Statement, which will show you an itemized breakdown of all costs involved.

Additional Mortgage Information: 

Click Home Loans & Info to find out more answers about getting a home loan.

Click Financing Definitions to learn more about home financing definitions.

Click Steps to Financing to learn more about home home loans & approval. 

Click Mortgage Calculator to estimate your new home loan payment.