Mortgage 101

You’ve done it! You’ve decided that it’s the right time to buy a house. Congratulations! Before you run out and choose a property and get a mortgage, make sure you have the knowledge to keep yourself—and your family—in a secure financial position.

 

How?

 

By learning the basics, of course! When it’s time to get a mortgage, many people assume they don’t need to know much because their realtor and lender will lead them through the process. While this is definitely true, doing your research and becoming an informed consumer will lead you to make the right decisions for your particular situation—and maybe even save you some money in the process.

  

First-time homebuyers

 

Let’s face it—mortgages can be complicated! Especially if you’re a first-time homebuyer. Let’s take a look at some things you need to know.

 

First of all, a first-time homebuyer is not necessarily someone who has never had a mortgage before. Did you know that? Different lenders define this in different ways but, at Mountain America Credit Union, a first-time homebuyer is defined as someone who has not owned a home for three years.

 

What if your goal of owning a home is down the road a little bit? Are there things you can do to position yourself better for a lower interest rate or better terms when you’re ready?

 

Nanette Graviet, associate vice president of mortgage services, says, “If you have the goal of homeownership and you have some time on your side, there’s a lot you can do.” Here are some ways to get prepared:

 

• Check your credit score—Take the opportunity to check your credit report. Look for anything that looks off to you—like an incorrect Social Security number, an account you don’t remember opening or a paid off loan that’s showing a balance. Get a free copy of your credit report from the three major credit bureaus at annualcreditreport.com.

   

  Increasing your credit score during this time can help you get a lower interest rate on your mortgage.
   

• Build a stable employment history—This time can also help you build up your job history, specifically the length of time at your current employer. This is something lenders look at because they want to know you have a stable income and you’ll be able to pay your mortgage.
   

  If you’re planning to buy a home in the next couple of years, do what you can to stay at the same job, or at least in the same industry, until you sign for your mortgage. When a lender sees a longer employment history with stable income, you can typically qualify for a wider range of mortgage options.
   

• Save for a down payment—Before you get into a new home, it’s a good idea to start saving for a down payment. Not every mortgage option requires a substantial amount down, but keep in mind that every dollar you put down at the beginning means a dollar that you don’t have to fit into your budget later on. While there are many programs out there that require little, or even nothing, down, you will still want some money set aside for the homebuying and moving process.

   

  And, while we’re on the subject, the best thing you can do for your dreams of owning a home is to make a plan—a budget. If you’re waiting awhile before you buy, take this time to create a budget that works for your income and lifestyle. Build in savings and automate what you can. Not sure how to get started? Here are some tips to create a successful budget.

   

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Why you should consider using a real estate agent

 

1. Expert advice—The pile of paperwork you need to complete the sale or purchase of a property is intimidating, even with the help of a professional. But alone, unless you have experience yourself, it can be downright soul-crushing! It can be very easy to miss a beneficial strategy or required disclosure or form.

    

   Christine Grenney, an assoiate broker at Summit Sotheby's International Realty in Park City, Utah, explains, "Data shows that if you are hiring [a real estate agent] who is skilled at what they do, and has the tools and resources to execute at a very high level, then chances are you're going to make more money and sell your house quicker than you would on your own."

    

   A knowledgeable expert will help you make the best deal, navigate negotiations and avoid delays or costly mistakes. It’s also important to have an advocate who will translate the industry jargon.
    

2. Objective information—A real estate agent has access to in-depth information on properties that a private individual cannot typically access. They can use this information—utility costs, school rankings, zoning regulations, etc.—to help you decide if a property is right for you and your family.
    

3. Turbocharged searching power—Anyone can find properties for sale on the internet. They are everywhere! While looking around on your own can give you an idea of what’s out there, a real estate agent has access to much more. Think properties that are available but not being advertised or properties that are coming to the market but not yet listed—these are the hidden gems you may find with a realtor.
    

4. Negotiating power—The factors of a real estate deal are numerous. A real estate agent has the training, local knowledge, and experience to look at every angle, taking your situation into consideration each step of the way. And, when it comes to the purchase agreement, an agent can craft one that includes the flexibility and allowances you need to confidently take the next step.
    

5. A steady support—A home is such a personal choice—emotions are bound to come into play. Afterall, not only is it probably the largest purchase of your life, but you begin to see your future in the property you’ve selected. Sometimes, things don’t go smoothly, and it can be difficult to keep your emotions in check. Having a concerned, but objective, third party helps you stay focused on the items that are most important to you.
    

6. Stellar connections—Most real estate agents make it their business to know as many people as possible. Hiring an experienced agent means you also get access to their network of mortgage brokers, home stagers, appraisers, contractors, etc. A veritable font of connections!
    

7. REALTOR^® or real estate agent—Did you know there was a difference? All realtors are real estate agents, but not all real estate agents are realtors. The realtor designation is given by the National Association of Realtors^® and requires additional training. Any real estate agent who has this designation is held to a higher ethical standard than licensed agents and must adhere to a specific code of ethics.
    

 

Which type of mortgage loan is best?

 

In addition to choosing whether you want a fixed or adjustable interest rate, buyers must also choose which type of mortgage to get. Knowing which one is best for your specific situation requires some research.

 

Many homebuyers don’t have a clue how many different types of mortgages are available or the specific features. That’s why we’re here! Below is a round-up of the most popular types of mortgages.

 

• Conventional—As a Mountain America Credit Union member, this loan comes with low rates and flexible financing. If you choose this type of mortgage, you can look forward to up to 95% loan-to-value financing, low mortgage insurance, loan amounts up to at least $766,550 and more.

   

• First-time homebuyer—Buying your first home is a big decision. First-time homebuyer mortgages allow amounts up to $300,000, up to 100% financing, as little as $1,000 down and the seller can contribute up to 3% toward closing costs.
   

• FHA—Some mortgage loans require a 20% down payment. However, with government-backed Federal Housing Administration (FHA) loans, you can put as little as 3.5% down. Both fixed- and variable-rate mortgages are available and mortgage insurance is required.
   

• VA—These loans from Veterans Affairs (VA) are for people who have served in the United States military. If you score one of these loans, you can look forward to a low interest rate, no down payment and no mortgage insurance requirements. In some cases, non-traditional credit is allowed (rental payment history, utility bills, telephone/mobile services and cable/streaming services).
   

• Construction—Rather build the home of your dreams? Construction loans have flexible terms so you can get exactly what works for you—up to 95% loan-to-value financing, local draws or disbursements, local servicing, owner-builder and contractor options and more.
   

• Reverse—Let your home equity work for you in your golden years. Similar to a home equity line, a reverse mortgage puts money in your pocket for expenses in retirement. Then, when you move or pass away, the money you’ve used (plus interest) is deducted from the value of your house. At that time, your heirs can sell the house and receive the balance, or they can pay the difference and keep the home.
   

• Learn about these loans, too: lot and land, jumbo and rural.
   

When it comes to mortgages, there’s a lot to learn! If you’re ready to get the home of your dreams, now is the time to talk to a professional. Mountain America is here to review your options, walk you through the process and get you the best deal.

 

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