Is there anything more fun than house hunting with your partner? Each house carries day dreams of what life would be like there. Each one becomes more real than the last until finally you find "The One." The fun part is now over and the process of getting a mortgage begins. It can be a little scary but once you under stand how the process of mortgage loans works it is very bearable.
If you have gotten as far as the house hunting then you probably been planning ahead and been saving money for your down payment. That is a good thing as any money you pay up front is money that you do not have to borrow. When you think about the term of the loan you will see one dollar now will save you a couple of dollars down the road in interest. It also helps you in a second way. Sometimes the bank is not willing to give you mortgage loans for the full amount so it reduces the amount you need to borrow.
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In the simplest terms, mortgage loans are just a secured loans with a house acting as the collateral on the loan. This, of course, means that if you default on your loan the bank or mortgage company has the right to foreclose on the house and sell it to recoup their loss on the loan. We have all seen the "for sale" signs out side of homes that say "Bank owned." That would mean the house was defaulted as banks are not in the real estate business any more than they have to be. That little fact can often work in your favor down the road if you run into hard times. The holder of the mortgage will often be accommodating rather than have to foreclose and then have to worry about selling the house.
Now that you have picked a home and have your down payment. The next step is the paper work. If you planned ahead you have also been collecting data and paper work to serve as supporting documentation. You will quickly find that there is no such thing as too much supporting documentation. It is better to have it together and organized before you need it rather than trying to collect it later. Once submitted it goes to an underwriter for review. Hopefully it will be approved but sometimes with mortgage loans they will also add a stipulation or rider to cover contingencies.
Just when you thought it was all over you might be surprised that your bank might not to continue to own the loan through its entire life. Most likely they will sell your loan to a third party. That should not worry as your terms will not change. The bank does this to raise capital to make new loans.
That is basically all there is to mortgage loans. The major thing you can do is plan ahead and be organized. All the rest of the pieces should fall together.
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