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About The Homebuying Process
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Choosing a Mortgage
You’ve determined how much monthly mortgage payment you can afford using the Housing and Debt Ratio Worksheet. The next step is making a loan application and getting approved for the mortgage amount and interest rate you want. This process includes:
- Choosing a mortgage
- Taking the loan application
- Determining your credit worthiness
- Running the information through our automated underwriting system
- Verifying employment, rent/mortgage, and deposits
There are many different loan programs available. These fall into one of two loan categories: fixed-rate and adjustable-rate.
Fixed-Rate Mortgages
A standard fixed-rate loan has a fixed interest rate, a fixed monthly payment, and is fully amortizing—that is, you pay off the loan completely—over a given number of years (for example, 15 or 30 years). A portion of each monthly payment covers the interest on the loan. Another portion reduces the principal balance. Regular payments systematically whittle down the amount you owe until the loan is paid in full.
Adjustable-Rate Mortgages
Adjustable-rate mortgages (ARMs) have interest rates that go up or down with the economy, which could change your payment amounts from year to year. ARMs help lenders cover the cost of lending money in a changing economy by transferring a portion of the interest rate risk to you. In exchange for sharing the risk, you’re offered an initial interest rate that’s often substantially lower than the interest on fixed-rate loans.
Choosing the Best Loan
When evaluating loan programs you should consider:
- Do you qualify for the loan amount?
- How long do you plan to live in the home?
- Is your income stable or rising?
- Are there likely to be significant interest rate changes?
- What are the upfront costs?
When you’re ready to apply for a loan, your loan officer will review the available loan programs and help you determine the type that’s best for you.
For an informative preview of the most common types of loans available from Freedom Mortgage, view our Finding the Right Mortgage comparison chart.
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