Home purchase loans have floating or fixed interest rates, paid along with a contribution to the principal loan amount every month. A fixed-rate home mortgage has the same periodic payment and interest each period. A floating or adjustable-rate home mortgage differs from a fixed-rate home mortgage since it generally has low-interest rates, but the borrower risks increasing interest rates.
A home loan application requires the borrower to present the application and attach their financial history to the lender. This proves to the lender that you are capable of paying the loan. If you are unsure which lender to approach, a mortgage broker is better suited to help you find one that suits you.
The initial step of application requires you to get pre-qualified, which involves supplying the lender or bank with a complete picture of your finances. This includes debt, income, and assets which the lender reviews before giving you an estimate of the amount you can borrow. There is no cost involved during pre-qualification, and it is done over the phone or online.
Pre-approval is the second step and involves filling out an official application and supply the lender with relevant documentation for an extensive assessment of your finances and credit rating. Afterward, you will receive a conditional commitment for the exact loan amount, allowing you to search for a home for that same price or slightly below.
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