A mortgage is a loan that helps you finance the purchase of a home. When you take out a mortgage, you agree to pay back the loan over a set period, usually 15 or 30 years. Each month, you’ll make a payment toward the principal (the amount you borrowed) and interest (the cost of borrowing the money).
If you are a current homeowner wanting to get the most equity out of your home to use as a down payment on your next home purchase, consider taking out a home improvement loan. Making the necessary repairs and improvements can help you get top dollar, which will in turn make your new mortgage even lower.
As you make payments towards your mortgage, the principal will gradually be paid off until your loan is fully repaid. Mortgages are typically offered by banks, credit unions, and other financial institutions. If you’re thinking about buying a home, a mortgage can be a helpful way to finance your purchase. Before you apply for a mortgage, it’s important to understand how they work and what you’ll need to do to get approved.
If you’re in the process of applying for a mortgage, it’s important to be prepared with all of the necessary documentation. Your lender will need to see proof of your income, employment, assets, and debts.
Here is a complete checklist of the documents you’ll need to provide:
- Pay stubs or other proof of income
- Tax returns
- Bank statements
- Mortgage application
- Mortgage loan estimate
- Mortgage loan agreement
- Homeowner’s insurance policy
- Proof of employment (e.g. offer letter, pay stubs)
- Credit report
- Debt information (e.g. credit card statements, student loan statements)
- Driver’s license or other government-issued ID
- Social security number
You might also need the following documents in certain situations. If applicable, have the these handy:
- Gift letter
- Mortgage payment history
- Mortgage insurance policy
- Home inspection report
- Appraisal report
- Property survey
- HOA documents
- Mortgage payoff statement
- Mortgage statement
- Home equity line of credit statement
- Mortgage insurance declaration page
- Mortgage note
- Mortgage deed of trust
- Mortgage assignment
- Mortgage release
- Mortgage satisfaction
- Title insurance policy
- Escrow documents
- Bill of sale
- Property tax statements
- Flood insurance policy
- Condominium documents
- Lease agreement
- Rental agreement
- Mortgage payment coupon book
- Mortgage rider(s)
- Fraud prevention certification form
- Anti-money laundering certification form
- Mortgage terms and conditions addendum
- Mortgage loan originator compensation addendum
- Mortgage loan servicing transfer addendum
- Mortgage insurance cancellation rider addendum
The bottom line
Buying a home comes with several benefits, including building equity, receiving tax breaks, and having a place to call your own. You also gain some financial stability, as your monthly mortgage payments will remain the same for the term of the loan while rents can fluctuate year-to-year. And, unlike renting, you can make changes and improvements to your home without needing approval from a landlord.
As a homeowner, you’ll also receive certain tax breaks that can save you money come tax season. For example, you can deduct mortgage interest and property taxes from your federal income taxes. Lastly, owning a home gives you a sense of pride and accomplishment—it’s a place you can truly call your own. Whether you’re looking for financial security or simply want a place to call your own, buying a home has numerous benefits, and a mortgage can help make that dream a reality.