Questions & Answers About Mortgage Loans

If you've never purchased a home before (and even if you have!) the process can be rather confusing. A successful real estate closing requires effective cooperation between several parties, including the buyers, sellers, lenders, real estate agents, title insurance company, and the builder and homeowners' association (if applicable). Each party has its own list of things to do and requirements to meet in order to play their role in the process. Today, our local real estate agents at the Lake of the Ozarks are here to help you make sense of one particular aspect of the home buying process: the mortgage loan.

We are not mortgage lenders (nor do we aspire to be), but we have been through enough real estate transactions to have a basic understanding of how the process works. Here are some general answers to a few of the questions we hear our clients most often ask about mortgages.

What Will My Interest Rate Be?
Unfortunately, it is impossible to provide any sort of accurate estimate for your interest rate without having your lender evaluate your credit history, your credit rating, your current financial assets, and your debt-to-income ratio. Your interest rate will also depend on the type of home loan you choose. On average, however, current interest rates for fixed mortgage loans are hovering around the 3.8-4.2% range.

What Is A Fixed Mortgage?
A fixed mortgage is a mortgage whose interest rate will remain constant throughout the duration of the loan, regardless of where the market goes. The only thing reason your monthly payment would fluctuate under a fixed mortgage is if your property tax changed (most mortgage payments have property taxes and homeowner's insurance built in as part of their escrow services).

What Is An Adjustable Rate Mortgage?
In an adjustable rate mortgage (or "ARM"), the interest rate will remain consistent for a specified amount of time (generally three or five years, but it could be longer). After that, the interest rate will adjust to match current market standards. The upside to an ARM is that the initial interest rate is usually much lower than rates for fixed mortgages. The downside is that there is no way to predict how much your monthly payment will be after the initial period expires - it could increase drastically and become difficult to afford.

How Much Money Do I Need To Put Down?
Again, there is no guaranteed amount someone who is buying a house at the Lake of the Ozarks will need to put down in order to secure a mortgage loan. The down payment requirements for each different type of loan can vary from anywhere from 0% to 20%. You will have to work with your lender to determine how much money you will be required to put down.

How Long Does It Take To Be Approved For A Mortgage Loan?
The amount of time it takes for a home loan to be approved depends on (again) the type of loan you're applying for, how quickly you can get your documents to your lender, and the lender's current workload. From start to finish, the entire process typically takes several weeks. Because of the amount of time required to qualify for a home loan, there is currently a big push for home buyers to get prequalified or preapproved before getting too far in the home buying process.

What Is The Difference Between Prequalification And Preapproval?
While fundamentally similar, prequalification and preapproval represent two different places in the process of applying for a home loan.
  • To be prequalified, you have to provide your lender with a description of your general financial position so your lender can tell you what he/she believes you will qualify for, based on the information you relayed to them.
  • To be preapproved, you have to submit proof of your financial position (such as pay stubs, bank statements, and previous tax returns) to your lender so your he/she can tentatively approve you for a loan, based on an in-depth an analysis of your financial position.
Prequalification is a fairly simple process that can typically be done over the phone in a just few minutes, whereas preapproval may take several days. Because preapproval is a more involved process, buyers who are preapproved are often viewed as more credible than buyers who are prequalified.

Other Questions About Real Estate? Give Us A Call!
Real estate can seem confusing, but Fran Campbell Team is here to make the process easier! If you're thinking buying a waterfront home at the Lake of the Ozarks, give us a call. We would love to work with you!

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