Video Transcript: Homebuyer Mortgage Process
Voice Over: AOL and Bank of America Home Loans – helping you find out what works now.
Stacey: Buying a home is often the largest purchase you'll ever make, and obtaining a mortgage can be a complex process.
Narrator: We decided to sit down with a homeowner to hear about her experience when she borrowed money to buy her first home.
[Enter Christine, a homeowner]
Stacey: Did you get pre-approved by a lender before you went house hunting?
Christine: Before I went house hunting, I went to my local bank where I have my checking account. They were happy to pre-approve me. They asked for some personal information, but it was a pretty straightforward process. And then it really helped to know, in terms of budgeting, what I could afford.
Narrator: It's a good idea to get pre-approved for a loan, so you can look for homes within your price range. It will also let sellers know that you're serious about buying.
Stacey: There are lots of different mortgages to choose from, including fixed-rate loans and adjustable rate mortgages. It's important to understand the differences, and to know which is right for you.
Narrator: A 30-year fixed-rate mortgage maintains the same interest rate over the length of the loan. An adjustable rate mortgage starts lower than a fixed rate mortgage, and then adjusts in line with current interest rates.
Christine: I got a 30-year fixed mortgage. It was the lowest monthly payment, and I liked having a fixed rate so I knew exactly what I'd be paying every month.
Narrator: You can also lower your interest rates by buying points. Points are upfront fees charged by a lender in exchange for a lower interest rate over the lifetime of a loan. This is an option buyers may want to consider if they plan to live in the same home for many years.
Stacey: After applying for your mortgage, you'll receive a good faith estimate listing all the closing costs you should expect, including lender and third party fees for processing and closing your loan. Don't be surprised to find that it adds up to three to five percent of your total mortgage value.
Christine: The good faith estimate was definitely very helpful. It listed estimated fees that we would owe the lender when closing came around, so we would know what to put aside for closing.
Christine: Next in the process was the inspection of the property and the title search, and then we just waited to be approved.
Stacey: So what happens at closing?
Christine: Before the closing we received the HUD-1 settlement that had the final list of fees that we owed the lender. Our lawyer compared that to the good faith estimate, and if there were any differences we were credited or paid. We had to sign on the dotted line, and then we handed over a very large cashier's check and received the keys to our new home.
Stacey: That must have been such a great feeling.
Christine: It was!
Stacey: Now you've heard about the mortgage process directly from a homeowner. It's time to start on your budget, so you can become a homeowner, too.
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