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Most people need a mortgage in order to purchase a home. While many financing options are available, these are the most common:

Conventional Loans
A loan made with real estate as security and not involving government participation in the form of insuring (FHA) or guaranteeing (VA) the loan. The mortgage can be from a institutional lender (Bank) or a private party.

FHA Loans
Insured by the Federal Housing Administration, FHA loans are popular because of the lower down payment required. They exist to help finance low to average-priced homes. The maximum loan amount varies by county. In addition to principle, interest, tax, and insurance, FHA loans require a payment of a monthly Mortgage Insurance Premium (MIP) of .5% of the loan balance. MIP amounts can change from time to time, check with a lender for a current rate.

VA Loans
Guaranteed by the Veterans Administration, VA loans are available to buyers with VA eligibility and typically require no down payment, though closing costs and fees must be paid at the time of closing. Most new homes and many resale homes may be financed under the VA-guaranteed loan method.

Other Considerations:

Fixed Rate Mortgages
These are mortgages where the monthly payment amount remains fixed over the life of the loan. Many buyers choose fixed rate loans because they like the security of knowing their payments will not go up over time.

Adjustable Rate Mortgages
"ARMS" are popular because they enable buyers to qualify for a more expensive home than they would otherwise. Buyers qualify based on a lower rate at the beginning of the mortgage period, which then adjusts over time in accordance with a specific formula. Buyers take the risk that payments could raise over the life of the loan -- sometimes substantially. Many ARMS are tied to specific national economic indices, however, which mean a possibility of payments adjusting downward as well as upward.

Mortgage Loan Term
This refers to the number of years allowed for repayment of the mortgage. A longer mortgage term (such as the typical 30-year loan) allows for lower payments, but the mortgagee pays a great deal more interest over the life of the loan. 15-year loans have become popular over the years because buyers know they will build equity faster and end up paying far less for their home. However, the higher monthly payments mean they buy a less expensive home than they could qualify for with a 30-year loan. Each buyer has to decide which option works best for him or her. Lenders may also offer loans that have 10 and 20-year repayment periods.

Mortgage Pre-Qualification
Buyers are well advised to go through the "Pre-Qualification" process with mortgage lender prior to their home search. This will give you an accurate idea of the mortgage amount you can qualify for, which determines how expensive a home you can buy. The mortgage company will issue you a "pre-qualification letter" stating the maximum mortgage amount they would lend. This document is useful to have before you enter into the negotiating stages for any property -- especially in a strong market where multiple offer situations can occur. Sellers will give greater consideration to your offer if they know you are financially able to complete the transaction. Many lenders offer a quick and easy pre-qualification process.

Mortgage Application Process
The mortgage application process can take place before or after you've entered into a contract to purchase a home. In a strong real estate market, getting mortgage PRE-APPROVAL is a good idea. It removes any question as to whether you will be able to obtain financing and complete a purchase transaction. Whether you go through the loan application process before or after signing a sales contract on a home, the lender will need certain documentation from you to assemble a loan package for consideration by the underwriting department.

These are the items you'll need to furnish your lender:

·Fully executed sales contract (unless getting Pre-Approval)
·Driver's license(s) and social security number(s)
·Addresses for past 2 years residences
·Names, addresses and phone numbers for all employers for the past 2 years
·Self employed applicants must provide: 2 years tax returns (business and personal, all schedules and K-1's) and current year income statement and balance sheet.
·Commissioned applicants: 2 years tax returns and current paystub reflecting year-to-date earnings and expenses.
·Names addresses and account numbers for all depository accounts for checking, savings, brokerage accounts, etc. Provide balances as well as copies of the most recent statements.
·Copy of complete separation agreement and/or divorce decree, if applicable.
·Copy of lease(s) on rental property.
·W-2 for previous 2 years and/or 1099(s) if applicable.
·Most recent paystub(s)
·A check to pay for a credit report
·Bankruptcy filing and discharge papers.
·Lender name, address, and loan number for any properties owned during the past five years.
·Evidence of satisfaction of any judgments or collections of public record.

Start gathering this paperwork together once you have made a serious decision to start house hunting. If you need replacement copies of any of the above, you will have time to request and receive them.