If you are considering buying a home in the coming weeks or months, you may be taking time to learn more about the financial aspect of purchasing a home. While you certainly want to find a home that meets your needs with regards to size, number of bedrooms and so forth, you also need the financial means necessary to purchase the home. While you can pay cash for the purchase of your new home, most people will apply for a mortgage to fund their purchase.
How A Home Loan Works
A mortgage, otherwise known as a home loan, is a loan that uses your new home as collateral for the purchase. Your home lender will be listed as the lien holder on the property's title. The lender will have the ability to foreclose on your home if you do not make payments on your home loan as agreed. Once the loan has been paid in full, the lender will be removed from title. At that time, you will have full and complete ownership of the property.
Different Loan Terms
While it is easy to lump all home loans together in a group, the fact is that many lenders offer different loan terms to you, and they may also have different requirements you must meet in order to qualify. For example, the interest rates and fees offered by different lenders commonly vary. In addition, requirements for your credit scores, your personal debt-to-income ratio and more may also vary from lender to lender. To find the most success when shopping for a new home loan, you may consider reviewing your own credit scores and working with a mortgage broker to get prequalified for the best loan terms possible.
What Happens at Closing
If you plan to use a home loan to pay for your new home purchase, you will need to be approved for your home loan prior to closing on your home purchase. Once you have been approved to close on your loan, the title company or real estate attorney who is assigned to handle your closing will prepare a closing statement for both you and the seller. The closing statement will itemize each of the loan charges that will need to be paid off at closing as well as all sources of funds that are being used to pay for those charges. The charges you may be responsible for include title fees, lender fees, the actual sales price of the home and more. The credits that may be listed on your behalf include the full amount of loan proceeds as well as your down payment. The title company will handle wiring funds to the appropriate parties. You will only be required to pay for the down payment and any additional fees not covered by the loan amount. On the seller's side, your loan amount and down payment will be credited to the seller. The seller may use these funds to pay off his or her own mortgage, which would release their lender's claim on title to the property. Any additional funds will be shown as a profit to the seller. Ultimately, at closing, all parties who have a financial stake at closing will transfer funds, and title will be transferred from the seller to you.
A mortgage is beneficial and even necessary for so many home purchases. Many people do not have the financial means to pay cash when buying a home. Those who do may not want to relinquish such a sizable amount of money. By applying for a home loan, you can more easily afford to purchase a new home.
How A Home Loan Works
A mortgage, otherwise known as a home loan, is a loan that uses your new home as collateral for the purchase. Your home lender will be listed as the lien holder on the property's title. The lender will have the ability to foreclose on your home if you do not make payments on your home loan as agreed. Once the loan has been paid in full, the lender will be removed from title. At that time, you will have full and complete ownership of the property.
Different Loan Terms
While it is easy to lump all home loans together in a group, the fact is that many lenders offer different loan terms to you, and they may also have different requirements you must meet in order to qualify. For example, the interest rates and fees offered by different lenders commonly vary. In addition, requirements for your credit scores, your personal debt-to-income ratio and more may also vary from lender to lender. To find the most success when shopping for a new home loan, you may consider reviewing your own credit scores and working with a mortgage broker to get prequalified for the best loan terms possible.
What Happens at Closing
If you plan to use a home loan to pay for your new home purchase, you will need to be approved for your home loan prior to closing on your home purchase. Once you have been approved to close on your loan, the title company or real estate attorney who is assigned to handle your closing will prepare a closing statement for both you and the seller. The closing statement will itemize each of the loan charges that will need to be paid off at closing as well as all sources of funds that are being used to pay for those charges. The charges you may be responsible for include title fees, lender fees, the actual sales price of the home and more. The credits that may be listed on your behalf include the full amount of loan proceeds as well as your down payment. The title company will handle wiring funds to the appropriate parties. You will only be required to pay for the down payment and any additional fees not covered by the loan amount. On the seller's side, your loan amount and down payment will be credited to the seller. The seller may use these funds to pay off his or her own mortgage, which would release their lender's claim on title to the property. Any additional funds will be shown as a profit to the seller. Ultimately, at closing, all parties who have a financial stake at closing will transfer funds, and title will be transferred from the seller to you.
A mortgage is beneficial and even necessary for so many home purchases. Many people do not have the financial means to pay cash when buying a home. Those who do may not want to relinquish such a sizable amount of money. By applying for a home loan, you can more easily afford to purchase a new home.
