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MORTGAGE GUIDE
Mortgage Process
- Consult with a mortgage broker to learn how much you are qualified to borrow – discuss mortgage conditions, required documentation, loan limit, debt ratio, etc.
- Submit proof of income and a credit report to obtain Pre-Approval.
- Once the attorney review is completed, submit all mortgage-related documents to the mortgage company.
- The mortgage company orders an appraisal through a third party.
- If the contract price is in line with the appraisal value and the mortgage application is approved, the Mortgage Commitment Letter is issued.
- Within 30 days of closing, the mortgage rate can be locked.
- Obtain property insurance following the mortgage company’s guidelines.
- Receive and review the Closing Disclosure from the mortgage company.
- Sign all mortgage documents during the closing.
Mortgage Documents
- Proof of Income – 2 years of tax return, W2 Form, or 1099-Misc Form
- Proof of Employment – 4-5 recent pay stubs
- Proof of Funds – Issued from the bank The down payment amount must be available in the bank account
- Identification – Photo ID
- Social Security Card
- Credit Report or agreement to Credit Review
- Proof of business if self-employed
TYPES OF LOAN
Conventional Loan
A conventional loan is a home mortgage not insured by a government agency. It typically meets the down payment, income, and loan limit requirements set by Fannie Mae, Freddie Mac, and the FHFA. While requirements vary by lender, a minimum credit score of 620 is usually needed, with 740 required for the best rates. Common loan terms are 15, 20, or 30 years.
Jumbo Loan
A jumbo loan exceeds the conforming limits set by the FHFA. In 2020, the limit is $510,400 for single-family and $653,550 for two-family homes in most areas, with higher limits in places like New Jersey. Jumbo loans aren’t eligible for purchase or guarantee by Fannie Mae or Freddie Mac.
FHA Loan
An FHA loan, backed by the Federal Housing Administration, offers low down payments (3.5% with a 580+ credit score) and flexible income requirements. As of 2020, loan limits reach $765,000 in most northern New Jersey counties. Borrowers must pay PMI until 20% equity is reached.
FHA 203K Rehab Loan
An FHA 203K Rehab Loan allows buyers to finance both a home purchase and renovations in one loan. It’s ideal for fixer-uppers planning residential use, not investment. Requirements are the same as other FHA loans. The Limited 203K covers projects up to $35,000, while the Standard 203K is for larger renovations and requires a consultant.
Adjustable Rate Mortgage
An Adjustable-Rate Mortgage (ARM) has an initial fixed interest rate that later adjusts periodically based on market rates. Choosing an ARM or a fixed-rate mortgage depends on your personal financial situation.
Fixed Rate Mortgage
A fixed-rate mortgage offers stable payments with an interest rate that remains the same for the loan term, providing protection against rising rates.
VA Loan
A VA loan is a no down payment mortgage for veterans, active service members, reservists, and spouses, backed by the Department of Veterans Affairs. It requires no mortgage insurance but includes a VA funding fee, which can be rolled into the loan.
Fix & Flip Loan
Fix-and-flip loans are short-term loans for real estate investors to buy, renovate, and sell properties for profit. Typically offered to experienced investors, these loans are provided by banks or hard money lenders, who accept property or assets as collateral instead of requiring credit or income verification.
NON-QM Loan (Bank Statement, Portfolio Loan)
The Portfolio Loan and Bank Statement Program are designed for borrowers who don’t meet traditional financing standards. Offered by select banks, these loans require a higher credit score, a larger down payment, and may come with higher interest rates or fees for more flexible qualification requirements.