“Answers to the Top 7 Mortgage Questions” – Bill Moore, Synovus

A home is usually the biggest purchase we make in our lifetime — one that carries a lot of emotional and financial value. Finding the right house is the first step of the process. Next comes working with a lender to get a mortgage.

Approaching a bank for a loan can feel intimidating. There’s unfamiliar terminology and confusing paperwork. However, if you ask important questions up front, you’ll have the confidence and knowledge to move through the mortgage process with ease.

Here are answers to the top mortgage questions homebuyers are often afraid to ask, but should:

  1. What documentation do I have to provide to get a mortgage?

According to Bankrate, when you’re buying a home, most lenders will require the following items to process your mortgage approval:

  • Proof of income: Grab your most recent W-2 forms, pay stubs, bank statements, and any other proof of income to show your lender. Having proof of income demonstrates that you can make mortgage payments.
  • Tax returns: In addition to income, your lender will want to see recent tax returns (typically from the last one or two years).
  • Debts: Your lender needs to know how much debt you have (if any) — and how much you pay each month toward student loans, car payments, credit cards, or other debts.
  • Assets: If you have any savings accounts, investments, CDs, or other assets, have proof handy. These accounts enhance your creditworthiness.
  • Residence history: Your lender may require proof of your past addresses, including landlord references.
  • Documentation of any gifts or loans for the down payment: First-time homebuyers often get a little help from family members to make their down payment. In that case, your lender will need documentation of any financial gifts or personal loans.
  1. What’s the difference between being pre-qualified and pre-approved for a mortgage?

Think of a pre-qualification as a quick snapshot of your green light to take out a mortgage loan. The pre-qualification considers your credit score and self-reported income and gives you (and your realtor) a ballpark idea of how much house you can afford to buy. It’s an approximation, not a promise, cautions the Consumer Financial Protection Bureau.

A pre-approval, though, is more complex. To obtain a pre-approval, you’ll need to provide more than just your Social Security number and income. Most lenders will want you to fill out a loan application, provide documentation of your income, assets, and debts, and submit a full credit report (not just a credit score) before they’ll provide a pre-approval. Then you’ll receive a conditional commitment in writing that states the lender approves you for a specific loan amount. In competitive housing markets, a pre-approval gives you an edge over other buyers (and it may be required to make an offer).

  1. What’s a debt-to-income ratio?

Your debt-to-income ratio (DTI) is the current amount of debt you have when compared to your income. Some experts weigh this ratio even more heavily than your credit score. A high DTI might indicate to lenders that you have too much debt for your income level and might not be able to pay a mortgage. A low DTI shows that you have a good balance between debt and income and can handle mortgage payments.

  1. What’s an escrow account?

Simply stated, an escrow account is a holding account. Lenders hold money in escrow to pay property taxes and homeowner’s insurance. They do this for two primary reasons: (1) to ensure these payments are made on time (to protect you and the bank’s investment) and (2) to help reduce the financial strain on the buyer. Each month, in addition to the mortgage principal and interest, you pay a portion of these estimated annual costs as part of your mortgage payment. The bank holds this extra money in your escrow account and then pays your insurance and tax bills when they are due. (Learn more about escrow accounts here.)

  1. What’s an appraisal?

As the National Association of Realtors (NAR) explains, an appraisal report provides an approximate value of the home. Appraisals are conducted by experts (called appraisers) who are licensed or certified by the state. Appraisers look at many factors, including the square footage and condition of the home, comparable sales in the neighborhood, and features that add to or detract from the value of the property (such as garages, pools, alarm systems, landscaping, etc.). Lenders require an appraisal to determine the property’s value and the maximum possible loan amount.

  1. Why is a home inspection report needed?

Many lenders ask you to get a home inspection report before purchasing a home. As the NAR explains, investing in a detailed home inspection up front will save you money in the long run. The last thing you want is to purchase a home only to discover down the road that it needs costly repairs. The inspector will spend hours looking at the home in detail and documenting its condition. With the report in hand, you can go back to the seller and request repairs or a reduction in sale price to cover the cost of repairs. If you skip the home inspection and there are obvious problems, the appraiser may note them and reduce the value of the home, which will impact how much you can borrow.

  1. What’s an amortization chart?

Think of the amortization chart as a road map for paying off your loan. It’s a table that shows how much of every monthly payment is applied to principal, how much is applied to interest, and how much your loan balance is after that particular monthly payment is made. In addition to showing how each payment is applied, the amortization chart can help you plan and predict when your mortgage will be paid off. If you’d like to see your loan payment and amortization schedule, use this calculator from FINRA.

Still have questions? 

Talk to a Synovus mortgage originator to learn more about borrowing for your first home. We’re happy to help! Or call us at 1-888-SYNOVUS (1-888-796-6887).

About Synovus

Synovus Financial Corp. is a financial services company based in Columbus, Georgia, with more than $32 billion in assets. Through our wholly-owned subsidiary, Synovus Bank, we provide commercial and retail banking services, including private wealth management, home equity lines of credit, cash flow management, international banking, and more. Synovus also provides mortgages, financial planning, and investment advisory services through our additional wholly-owned subsidiaries — Synovus Mortgage, Synovus Trust, and Synovus Securities.

For more than 130 years, we’ve stayed true to the concept of banking is a service to our communities and to the people who live here. Our local knowledge combined with the expertise and resources of a large financial services company allow us to help our customers with their banking, lending, and investing needs. With locations in Georgia, Florida, Alabama, South Carolina, and Tennessee, we’re sure to have a location near you.

Important Disclosure Information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

Banking products are provided by Synovus Bank, Member FDIC. Synovus Bank, NMLS #408043, is an Equal Housing Lender.

Synovus Mortgage Corp, a subsidiary of Synovus Bank, lends in the states of Alabama, Georgia, Florida, Tennessee, North Carolina, and South Carolina. This communication is directed to properties in those states. Loans are subject to approval, including credit approval. Synovus Mortgage Corp., NMLS #179119, is an Equal Housing Lender.