Mortgage & Lending July 24, 2022

What You Need To Know About Mortgages

When you’re planning on buying a piece of Westport, CT real estate or are looking in any other market for your next home, you will likely need a mortgage.  Mortgages are loans that are backed by the real estate you are planning on buying and can allow you to buy a home, without needing to pay for it in cash.

There are generally three types of mortgages that you can take out to buy a home.  Each type of mortgage has its own pros and cons and should be carefully considered as you decide to make a home purchase.

  1. Fixed-rate mortgage: As the name suggests this is the type of mortgage where the interest rate remains the same the entire time you have the loan.  This provides you with a monthly payment that is predictable and doesn’t change over the course of the loan.
  2. Adjustable-rate mortgage: While you may be able to secure a lower interest rate by going with an adjustable-rate mortgage your loan may not maintain its low interest rate over the term of the loan.  Your adjustable-rate mortgage interest rate can change with market conditions or on a specific date.  
  3. FHA or VA mortgages: A mortgage from either the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA) are appealing because they often have lower down payment requirements and less restrictive guidelines for you to qualify for the loan.  The downside on these loans is that you have to meet certain criteria to secure a mortgage through these two programs, such as being a member of the military or if you’re buying your first home.

Once you have decided on the type of loan you will be working to acquire you will need to either get pre-qualified or pre-approved.  There can be some confusion about the difference between these two seemingly similar states your mortgage process can be in.  The basic difference is that getting pre-qualified is a relatively simple process where a lender will look at some information about you that you share with her/him.  Information that they will require in a pre-qualification process includes your income, your outstanding debt, and what you own.  The pre-qualification process does not require a credit check and it is not a guarantee of the terms of a mortgage that you may ultimately be approved for when it is time to purchase the house.

On the other hand, the pre-approval process is a comprehensive process where you officially submit an application for a mortgage and the lender will approve or deny your application.  The benefit to being pre-approved instead of pre-qualified is that the lender will likely provide you with a dollar figure you are approved for and you may be able to lock in an interest rate.

Once you are pre-approved for a mortgage you are ready to put an offer in on a piece of Westport, CT real estate that you love.   Wherever you are in the process of searching, you can always count on my team to help you navigate it.  Whether you’re just looking or ready to buy, contact me and I will be happy to answer any questions you have during your journey to find the newest place you will call home.