Home Financing Options with F&M Bank – Part 2
In this month’s installment, let’s talk about steps in prequalifying for a mortgage and touch on some of the most common mortgage types.
After you have reviewed your finances and have a general idea of how much house you can afford, the next step is to get “prequalified” for a mortgage loan. Getting prequalified simply means working with your bank and/or lender to determine how much you can borrow. Some banks or lenders call this step “conditional approval” because it provides you with a quick estimate of how much money you may be able to borrow based on your income, employment, credit and bank account information.
In order to obtain the most accurate prequalification amount, it is helpful (but not required until a formal application) during the prequalification process to provide detailed supporting documentation to your lender. This may include W-2 statements, pay stubs, tax returns, bank statements, and other financial information. The benefit of being prequalified prior to home shopping is that it may put you in a better negotiating position with a Seller. The bank/lender can provide you with a “prequalification letter” to submit with your offer to purchase indicating that your information has been reviewed and you are to be considered a credible Buyer.
This is also a good time to compare interest rates and other fees with potential lenders to see what the total cost of your loan might be. For example, aside from the APR (annual percentage rate) for the loan, there are oftentimes loan origination fees or mortgage points (referred to as discount points) that lenders charge to provide you with a loan and differ from source-to-source.
Home Mortgage Types
During the above process, your bank/lender should share with you the many types of mortgages that you could potentially obtain. Since there are a many different mortgage types to choose from, here is a list of the four most common types that we will explore in more detail next month:
- Fixed Rate Mortgages
- Adjustable Rate Mortgages (ARM)
- Government Insured Mortgages (FHA, VA, USDA)
- Conventional Mortgages
- Jumbo Mortgages
As always, come by and consult with one of our mortgage representatives at F&M Bank any time!
published on 8/30/2019