Let’s dive right in!
What is a mortgage?
A mortgage is a type of loan used to purchase real estate. It’s a legally binding agreement between a borrower and a lender, where money is borrowed for a set amount of time and repaid with interest until the loan is paid in full.
Breaking down the payment process.
Mortgage payments are typically made in monthly installments with a portion of each payment applied to both principal and interest using a formula that ensures the loan is paid in full at the loan maturity date when each payment is made in a timely fashion.
The amount of money borrowed is called the principal. A portion of the monthly mortgage payment reduces the outstanding principal balances helping you build equity in the property. The interest portion of the mortgage payment is the amount you pay to the lender to borrow the money.
In the early years of the mortgage, a larger portion of the monthly payment is applied to the interest due. Over time, less interest is owed and more of the monthly payment is applied to paying down the principal.
How to apply for a mortgage.
Getting pre-approved is the first step in the mortgage process. Engage a trusted lender to discuss your individual financial situation. They will review key documents including bank statements, pay stubs, W2 tax forms, credit reports, and valid identification. These documents will allow the lender to verify income, employment, and credit history to determine how much money they are willing to lend. The pre-approval lets the borrower know how much they can comfortably afford to spend and is valid for specified period of time depending on the lender. A pre-approval also has the added benefit of letting a seller know you are a serious buyer. You can learn more about the preapproval process by reading our advice article, How to Get Preapproved for a Mortgage.
The lender will review the financials and present mortgage options, including rates, terms, fees, down payment requirements and closing costs so the borrower can determine which mortgage option best suits their needs.
After the property is in contract and the purchase price has been set, the borrower can officially apply for the mortgage. The lender will schedule an independent appraisal to estimate the value of the property and may request updated financial documents from the borrower to ensure their financial situation has not changed.
Once confirmed, the lender can approve the application and provide detailed documentation regarding the loan terms. If the borrower accepts the terms and goes through with the property purchase, the paperwork is signed at the loan closing.
Your monthly mortgage payment should be a top priority. As with any loan, it’s important that payments be made on-time, each month. Using Jovia’s online banking and bill pay services to automate your monthly payment is a great way to stay on top of your mortgage. You’ve done the research and learned the lingo – now it’s time to apply.
It’s easy to apply!
The pre-approval and mortgage application process can take less than 15 minutes! Simply, use Jovia’s mobile-friendly app to apply, upload documents and monitor the status of your application. Click here to apply now!