The first step in buying a home
is identifying the right type of loan that fits your needs.
Buyers should carefully compare various loan options
including down payment requirements, eligibility criteria,
interest rates, and other terms
to make well-informed decisions about what is
likely the biggest purchase of their lives.
Whether you are a first-time homebuyer, a real estate investor, or looking to buy a second home, you can find and choose from a variety of home loan products that are specifically designed for your particular situation.
The down payment can come from the borrower’s own savings, a financial gift from a family member, or a grant for down payment assistance. Please consult your local CPA and mortgage broker for further details.
Mortgage Process
- Consult with a mortgage broker to learn how much you are qualified to borrow – discuss mortgage conditions, required documentation, loan limit, debt ratio, etc.
- Submit proof of income and a credit report to obtain Pre-Approval.
- Once the attorney review is completed, submit all mortgage-related documents to the mortgage company.
- The mortgage company orders an appraisal through a third party.
- If the contract price is in line with the appraisal value and the mortgage application is approved, the Mortgage Commitment Letter is issued.
- Within 30 days of closing, the mortgage rate can be locked.
- Obtain property insurance following the mortgage company’s guidelines.
- Receive and review the Closing Disclosure from the mortgage company.
- Sign all mortgage documents during the closing.
Mortgage Documents
- Proof of Income – 2 years of tax return, W2 Form, or 1099-Misc Form
- Proof of Employment – 4-5 recent pay stubs
- Proof of Funds – Issued from the bank The down payment amount must be available in the bank account
- Identification – Photo ID
- Social Security Card
- Credit Report or agreement to Credit Review
- Proof of business if self-employed
Types of Loans
Mortgage Vocabulary
(Definitions limited to real estate and mortgage, not general use)
| ADJUSTABLE RATE MORTGAGE | A mortgage loan that allows the interest rate to be changed at specific intervals over its term |
| AMORTIZATION | The gradual paying off of debt on an installment basis |
| ANNUAL PERCENTAGE RATE | The cost paid each year to borrow money, including not just interest rate, but all other fees and charges |
| BALLOON MORTGAGE | A mortgage loan that is not amortized, usually paid in a lump sum at the end of 5 or 7 years |
| CONVENTIONAL LOAN | A mortgage loan that is not insured or guaranteed by government agencies |
| DISCOUNT POINT | A fee paid by the borrower to a lender to reduce the interest rate (1 Point = Pay 1% of Loan = Decrease rate by 1/8% |
| FANNIE MAE | A part public, part private corporation that buys and sells mortgages in the secondary money market |
| FHA LOAN | A real estate loan that is insured by the Federal Housing Administration; 3.5% Down Payment |
| FIXED RATE MORTGAGE | A mortgage loan with an interest rate that does not change during the entire term of the loan |
| FREDDIE MAC | A federal agency that buys mortgages in the secondary money market from commercial banks |
| GINNIE MAE | A federal agency that provides special assistance for federally aided housing programs in the secondary money market |
| INTEREST | The cost to borrow money, usually expressed as a percentage of the amount borrowed |
| JUMBO LOAN | A loan that exceeds the mortgage amount eligible for purchase by Fannie Mae ($765,600 in Bergen County, as of 2020) |
| LENDER | The financial institution providing funds for the mortgage |
| LOAN ORIGINATION FEE | Fees paid to the mortgage lender for processing the mortgage application |
| LOAN TO VALUE RATIO | The relationship between the loan amount and the total value of the property (e.g. A $100,000 home with a down payment of $20,000 has a LTV of 80% or $80,000) |
| LOCK IN RATE | A written agreement guaranteeing a specific mortgage interest rate for a certain amount of time |
| MATURITY DATE | The date on which a mortgage loan is scheduled to be paid in full |
| MORTGAGE | A loan for purchasing a home taking the property as collateral |
| MORTGAGE BROKER | An individual or firm that brings borrowers and lenders together for loan origination |
| MORTGAGE COMMITMENT | A commitment by a lender outlining the amount they will loan to a qualified borrower on a particular piece of real estate |
| MORTGAGE RATE | The interest rate you pay to borrow money to buy your property |
| PRE-APPROVAL | Indication from the lender to a prospective borrower regarding how much money they will be eligible to borrow when applying for a mortgage loan; necessary when submitting an offer |
| PRINCIPAL | The amount borrowed that must be paid back, not including accrued interest |
| PRIVATE MORTGAGE INSURANCE | Insurance for a mortgage loan that protects the lender from loss in the event of default by the borrower, usually applies to a loan with a down payment of less than 20% |
| REFINANCE | Getting a new mortgage, where the current mortgage is replaced, usually for changes to interest rate |
| SECONDARY MORTGAGE | The marketplace for the sale and purchase of existing mortgages (Fannie Mae, Freddie Mac, Ginnie Mae) |
| UNDERWRITING | The process used to determine loan approval including reviewing the borrower’s credit score and ability to pay the mortgage |
| VA MORTGAGE | A mortgage loan guaranteed by the U.S. Department of Veteran Affairs |