Residential Mortgage Solutions Ludlow
Residential mortgages are a type of loan that uses the value of your house and property as collateral. Mortgages are an extremely useful type of home loan that can be used to fund large purchases such as a new car, renovations, or expansions of your property. The flip side, of course, is that failing to pay back a mortgage means the lender may be able to foreclose on your house. Fortunately, taking time to educate yourself on the process behind a residential mortgage and to evaluate your options is the first step in making a financially literate decision, which can help you get the funds you need while minimizing risk.
Factors for Qualifying for Residential Mortgages
Any lender, whether a bank or credit union, is going to evaluate you to see if you qualify for a residential mortgage. Anyone who doesn’t try to qualify loan seekers should be viewed as suspect and avoided if possible. When evaluating your qualifications, the three largest factors are going to be your income, down payment, and credit history.
- When looking at your income, lenders pay attention to the “front end” and “back end” ratios. The first is how much pre-tax income is spent on housing expenses and the second is how much of your income is spent on all forms of debt. The preferred ratio will vary slightly from lender to lender, but the front end should ideally be no more than 28% and the back end should be no more than 42% of your income in general.
- The size of the down payment affects your interest rate, with larger down payments generally resulting in lower rates. Keep in mind that this relates to the size of the down payment in relation to the value of the property, rather than the raw amount that’s paid itself. You can qualify with as little as 5% down.
- Your credit score is an assessment of your past and current debts and history of repayment, and it is used to assess how likely you are to make your payments. Like the down payment, the credit score can affect your interest rates.
In order to apply for a residential mortgage from LUSO Federal Credit Union, you have to be a Member. Click here to apply to become a Member.
Approval Process for a Residential Mortgage
It is generally easier to get a mortgage from a credit union than a bank, but there is still an application and approval process involved. Credit unions are more tailored to local needs so they will be used to working with the typical income levels and types of the surrounding region, and they may also have tailored loan products that wouldn’t be available at larger banks.
One important part of the approval process is going to be deciding whether you want a fixed rate or variable mortgage. As the name implies, a fixed rate mortgage has an interest rate that doesn’t change and is useful for anyone who wants a consistent monthly payment and ease of budgeting. Variable rate mortgages, conversely, have an interest rate that can change based on how the market performs. This could mean you have periods where your interest rate drops below the initial level, but you may also have times when it goes up instead.
Documents Required for a Residential Mortgage
There are also a number of documents you may need to produce so the credit union can perform an accurate evaluation and determine the most reasonable terms and interest rate. When applying for a mortgage from LUSO Federal Credit Union, the following types of documentation will be required:
- Copy of purchase and sales agreement or offer to purchase. This must be signed by all parties, including copies of any addendum
- Copy of deposit check
- Proof of inspection
- Copy of MLS listing (if applicable)
- Primary and secondary forms of identification
- Proof of employment for the past two years
- Divorce decree
- Information proving you have sufficient assets to close
This is not a full list of every document that will be needed and not all documentation is needed for every type of residential mortgage application. A detailed list can be found here.
LUSO Federal Credit Union is a member-owned, not-for-profit financial cooperative that is dedicated to providing members with quality financial services and products. We are a staple institution of Hampden County and take strides to help community members make a successful transition to home ownership through a variety of home mortgage options and other financial products. Feel free to contact our Lending Department HOTLINE at 888-848-5876.