Author: Shantanu

Comparison shop your mortgage Perspectives

First time home buyers: remember to shop, compare, negotiate

We’ve all been taught to shop around to find the best deal for the products and services we buy. Whether buying a new shirt or a cell phone, our parents always reminded to do our due diligence of shopping around before buying. That said, you would think that when it comes to buying a home—in most cases, the most significant purchase that we make over the course of their lives, we would certainly shop around for the best mortgage loan, right?…

Not so fast! According to the Consumer Finance Protection Bureau (CFPB) nearly half of all mortgage borrowers do not shop around — resulting in wasting thousands of dollars unnecessarily. While consumers tend to shop to find the right property or home, many never even compare two or more mortgage lenders during the home buying process. Ironically, most of the costs associated with buying a home have more to do with the mortgage than the property itself. If you are planning to buy a home, consider the following strategies to shop smarter and obtain the right mortgage product for your needs:

Shop the Mortgage First

In most cases, first-time home buyers get connected with a lender through referrals by their real estate agent after finding a desired property. Although finding the home first intuitively seems logical, it’s smarter to secure mortgage pre-approval before settling on a property. By obtaining pre-approval first, you are less likely to waste time looking at properties that exceed your qualifying amount. In addition, early pre-approval can lead to a more targeted home shopping process that helps you get into the right home faster. 

Find the Right Mortgage Shopping Partner

Direct lenders only offer mortgage products available in their own portfolio and as a result, they often try to match a diverse group of borrowers to fit into these restrictive products. Mortgage brokers on the other hand, tend to have access to a much broader array of products and programs making them much more likely to match the right mortgage to your unique needs. In general, potential borrowers have varying levels of readiness in terms of the “Big 3” categories of obtaining a mortgage; 1) credit, 2) down payment, and 3) income/expense ratio or overall affordability. For example, you may have an excellent credit rating, a solid job and income, but are challenged with coming up with a 20% down payment for your new home. Your broker’s portfolio of lenders will often include a suite of programs designed to address many down payment obstacles. Having access to these offerings can be the difference between being approved or denied for a new home mortgage.

Smart Shopping: Educate and Negotiate

While mortgage brokers offer lots of options for borrowers, you still should come to the table prepared to ask the right questions and articulate your needs. Always start by checking your credit reports and FICO Scores so you know exactly where you stand in terms of qualifying. In addition, it is highly suggested that you know the basic types of mortgage loans that are available on the market. These will include: Government guaranteed (FHA, VA, USDA) vs. Conventional, Fixed vs. Adjustable, Jumbo vs. Confirming and so on. In addition, the location of the property can also be an important factor as some mortgage types may or may not be available in certain areas.

Negotiating is often associated with a confrontational approach or taking something valuable away from the other party. However, effective negotiating with your broker is more about clearly articulating your preferences and needs and working together to achieve your mortgage goal. The best brokers provide value to the equation by listening intently to the borrower and consequently, offering the best mortgage choices. As a well-prepared borrower, you must not only ask questions, but you must ask the right questions which is key to negotiating the best possible mortgage. Remember the lessons that mom and dad taught you…and when you’re ready for that first home purchase, start by shopping the mortgage before the property, find the right shopping partner, educate and negotiate and you’ll be well on your way to making your new home dream, a reality.

There are key resources available online for comparison shopping your mortgage. STEM Lending, a based MortgageTech firm offers online, in-person and over-the-phone mortgage consultations from licensed mortgage experts to home buyers. As a FinTech mortgage broker, STEM Lending serves as the trusted advisor for homebuyers – bringing offers from multiple lenders onto one platform, so that homebuyers make the most rational decision on their mortgage options. Take the first step in saving on your mortgage, reach out to STEM Lending’s mortgage experts today:

Philadelphia Skyline Perspectives

Top 10 things Philadelphia mortgage seekers should know

Living in Philadelphia and ready to take a mortgage to finance your dream home? Buying a home is one of the most vital financial moves you will make in a lifetime. Here are 10 things you should know while seeking a mortgage:

1. Your credit score is vital. Before applying for a mortgage, get a recent copy of your credit report. If you have a low credit score, there are several things you could do to boost it, for example, you could close down your inactive credit card accounts.

2. Make a budget. Before applying for a mortgage, do a budget detailing the amount you need to buy the property and cover the related costs and fees. Always remember that the repayments will depend on the amount you borrow and the interest charged.

3. You’ll be better off avoiding frequent job changes. A number of lenders will prefer to lend to individuals who have been with an employer for a considerable time as an indicator of stable income and thereby a predictable ability to repay. If you are contemplating switching jobs, it is advisable to hang on to your current job until after you have taken the mortgage.

4. Significant unpaid debts can derail you. Lenders are skeptical about mortgage seekers with a whole lot of debts around. Before you apply for a mortgage, cut your credit card debts and pay off student loan in time to demonstrate your ability to manage money responsibly. Your mortgage application is more likely to succeed if you have less debt.

5. You will need proof of income before getting a mortgage. Mortgage lenders will need proof of how much you earn annually and a summary of how much tax is deducted. Also, ready your banking statements and pay-slips so that the lender can know how much you earn.

6. If you are self-employed, you also need to provide your income source. For self-employed people, lenders will want to be sure that you can keep up with the repayments. Here, you will need to avail your account statements detailing your financial position in the recent past.

7. Bigger deposits are a plus. The more the deposit you have, the larger the choices of mortgage that will be available to you. Most Philadelphia lenders reserve their best rates for clients with hefty deposits.

8. Buying with your spouse with a good credit score can boost your prospects. If you have a low credit score or you have no mean of coming up with the required down payment, you can consider applying for the mortgage together, with your spouse as the co-borrower (when the new home will be the primary residence for both). This can boost your chances of getting a mortgage especially if the other person has a strong credit history devoid of any delinquencies and a strong ability to repay the mortgage. However, this is a big commitment, and you may want to sit down with the other person to work out the specifics.

9. Do not alter your application. Once you have made your application, do not try to change any figures that could hold up your home purchase.

10. It is okay to get some help. If you are struggling to zero down on the perfect mortgage deal, or you are not sure of how much you need to borrow, you can enlist the services of a professional mortgage broker. They can conduct good market research for you and help you out with your application process. Getting the right mortgage is not a walk in the park; however, with the right advice and working with the right people, you can get the ideal mortgage to help finance your dream home.

For Philadelphia residents, there are several valuable resources available including the Pennsylvania Housing Finance Agency, Clarifi and Philadelphia Home Buyers MeetupSTEM Lending being Philadelphia-based MortgageTech firm, it offers in-person, online and over-the-phone mortgage consultations from licensed mortgage loan officers toto Philadelphia residents. To take the first step in getting prequalified for a mortgage and save on your mortgage, reach out to STEM Lending’s mortgage experts today:

Meeting Perspectives

Bank or broker: which is best for home buyers?

First-time home buyers often wonder if reaching out to a bank or a mortgage broker is the best option for them.

For a first-time home buyer, navigating the landscape of mortgage products can be a daunting task to say the least. You’ve got conventional vs. government insured, FHA, VA, USDA, Fixed, Adjustable, jumbo and the list goes on. For the first-time home buyer, this can all sound like “Greek” not to mention the stress associated with making the most important purchase decision of your life. While there are two basic options of acquiring a mortgage (direct lender/bank or mortgage broker), many questions remain, especially for millennials, who make up the majority of first time home buyers.

Direct Lender vs. Mortgage Broker? 

Too often, first-time buyers make mistakes that end up costing more in the long run. For example, a certain mortgage product might be geared towards long term occupancy, but if misunderstood, a buyer could pay significantly more if they ended up leaving the home sooner…and vice versa.
Many first-time home buyers end up with a direct lender, usually through referral by their real estate agent. Since direct lenders can only offer the products they sell, they tend to match the borrower to their product instead of the other way around, which often results in wasted valuable time or not getting the best mortgage based on your unique needs.

Key Factors to Consider

What are the cost differences between a direct lender and a broker? You want to look at the total mortgage costs. Note, that total costs are not the same as fees. While you need to compare the fees charged by direct lenders or brokers, it’s wise to compare the total mortgage costs to make the best choice. For instance, what are the costs of having too few mortgage choices? If the lowest cost mortgage for you never makes it to your comparison list, you probably will pay more than you need to. Another cost to consider is processing time. If your mortgage provider takes months to process your application, you will pay unnecessary rent as well as other expenses. When it’s all said and done, most first-time buyers match well with a mortgage broker.
Ok, you are convinced that a mortgage broker is the way to go, but aren’t all brokers the same?

Here are the three essentials to look for in your mortgage broker:

  1. Knowledge and Expertise: First and foremost, make sure your broker is truly an expert on all things mortgage finance and has knowledge on related areas of the home buying process—namely the big three; credit scoring, down payment, and income requirements. Consider the broad pedigree of the broker—their licensed credentials, industry experience, and perhaps most importantly, their willingness to listen and meet the needs of their clients. A true mortgage expert stands apart by explaining the “why,” not just the “what.” To evaluate customer satisfaction, check business review providers such as Yelp, the Better Business Bureau and others.
  2. Automated Platform: Traditional mortgage processing is extremely manual and paper-intensive. With the rise of financial technologies “fintech,” brokers can now deliver their mortgage and financial expertise via online platforms. Automation accelerates the qualification and application processes enabling brokers who operate on a well-designed platform to pass on the savings to their clients. Mortgage Brokers with automated platforms fit best with millennial buyers.
  3. Flexible Communication Preferences: Many brokers tend to rely heavily on lengthy telephone calls and emails to clients which often results in errors and inefficiencies. These limited communication channels do not align with the preferences of many home buyers. Moreover, millennials tend to prefer brief, online interactions that they can access on their smartphone. The fact is, people have unique communication preferences, whether it be; in person, text, email, or phone, so brokers who offer a broad set of communication channels are better positioned to meet their clients’ preferences.

There you have it. A mortgage expert can be your trusted advisor that helps match your needs to the best mortgage that’s available on the market. While following these tips will not teach you to understand Greek, it can help guide you to the path of achieving your dream of home ownership and financial security.

To take the first step in getting prequalified for a mortgage and save on your mortgage, reach out to STEM Lending’s licensed mortgage experts:

STEM Lending - Village Capital, Ben ranklin Tech Partners, UBS Selection Perspectives

Philadelphia Mortgage Tech startup STEM Lending selected for VC…

STEM Lending, Inc. is proud to announce that we have been selected as one of the eight startups to participate in Village Capital’s VC Pathways program in collaboration with UBS, world’s leading wealth management firm and Philadelphia-based Ben Franklin Technology Partners tech accelerator.

This is the second time Ben Franklin Technology Partners, Village Capital and UBS have teamed up to invest in entrepreneurs solving real world problems. VC Pathways is a national program for training founders to increase their competitiveness for seed-stage venture investments. Entrepreneurs in the VC Pathways program will receive training on the Venture Investment Readiness Awareness Level (VIRAL) curriculum, helping entrepreneurs set key milestones to make them competitive when raising capital.

We are very excited to participate in the program, which will run for three months, from January through mid-April 2018. The application pool was fiercely competitive, representing diverse start-ups from across Philadelphia, Atlanta, and Chicago.

Startups involved in this cohort will receive Amazon Web Services (AWS) credits for two years (up to $5,000), automatically qualify for a $10,000 interest-free Kiva Zip Loan, and receive deeply discounted access to HubSpot’s marketing and sales software to manage customer relationships and business leads. Cohort members also are eligible for up to $2,000 in grant funding, subject to hitting certain milestones.

In addition, STEM Lending will benefit from formal interactions with angel investors, UBS executives and mentors affiliated with the program who are interested in working with early-stage companies through one-on-one meetings, business development sessions and opportunities to highlight their milestone achievements.

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Immigrants Family Perspectives

Solving the mortgage needs of STEM immigrants in US

Recent immigrants to the United States face unique hardships and challenges when seeking all forms of loans: credit cards, auto loans and most significantly mortgages.

Research done by United States Department of Commerce’s Economics & Statistics Administration has established that Science, Technology, Engineering and Math (STEM) graduates workers drive innovation and competitiveness in the United States by generating new ideas, new companies and new industries.

The US National Foundation For American Policy (NFAP) presented an article on The Importance of International Students to American Science and Engineering in their October 2017 Policy Brief. The article presented statistics based on the US National Science Foundation’s survey of graduate students and postdoctoral scholars and showed an impressive observation: foreign nationals in the US account for 81 percent of the full-time graduate students in electrical engineering and petroleum engineering, 79 percent in computer science, 75 percent in industrial engineering, 69 percent in statistics, 63 percent in mechanical engineering and economics, statistics, 59 percent in civil engineering and 57 percent in chemical engineering.

Unique needs of immigrants concerning mortgages

With nearly 80 percent of Science, Technology, Engineering and Math (STEM) graduates being international, we at STEM Lending set out to explore what were the major challenges faced by immigrants when attempting to fulfill their American Dream – having a home of their own.

Coincidentally, The Wall Street Journal recently published an article titled Foreigners Seeking Mortgages Face Close Scrutiny. The article underscored that while the mortgage-application process can be daunting for even the most creditworthy borrower, the process is even more challenging for foreigners working in the US, who may not have adequate credit history or a permanent residency. Mortgage lenders typically seek two years of credit history of applicants, however recent immigrants often don’t have two years of residence or credit history in the U.S.

Inadequate credit history translates into unique challenges immigrants face despite having strong job prospects, stable earning potential and consequently, a strong ability to repay a mortgage. One argument that is often cited is that in the event of a job loss, an immigrant visa holder may decide to “dump everything and move back to home country”. The counter argument though, is that a job loss can in fact render a resident declaring a Chapter 7 bankruptcy, potentially eliminating their personal liabilities for mortgage loan.

How is STEM Lending addressing the needs of immigrants looking for a mortgage?

STEM Lending’s co-founder, Shantanu, is himself a first-generation immigrant entrepreneur. After earning a PhD degree in STEM field from the University of North Carolina at Chapel Hill, Shantanu embarked on his professional journey – industrial experience in science and technology jobs in US, while on a visa. Despite stable earnings from graduate school fellowship, it was challenge to obtain loan for even buying a car, let alone a mortgage.

Having first-hand experience of hardships encountered when seeking loans as immigrants, we at STEM Lending are committed to providing fair and accessible mortgages to creditworthy immigrants.

We firmly believe in evaluating mortgage application based on good faith determination of applicants’ ability to repay the mortgage: basing credit assessment on applicants’ income, assets, employment, credit behavior and their monthly expenses. We have partnered with multiple lenders to provide a diverse set of mortgage opportunities under one platform, thereby increasing the number of mortgage avenues immigrants get to explore.

Busy working professionals no longer need to visit multiple banks in person, fill out the same mortgage application form time after time, shopping and hoping to qualify for a mortgage. By streamlining the mortgage experience, we hope to help all creditworthy Millennials, inclusive of immigrants, will be able to gain access to fair credit, without hassle.

Please feel free to reach out to or contact us via if you have any questions.

Wishing you a happy home buying experience!

– STEM Lending Team

Mortgage Pre-approval Application Perspectives

How to prequalify for mortgage?

Home buyers can simplify the steps of buying their dream home by prequalifying for a mortgage. So, what exactly does a prequalify mean?

Mortgage pre-qualification enables you to estimate how much you can borrow from a lender. This helps you plan for the maximum price of the home you can afford using a mortgage financed by that lender.

Clearly, for maximum value, you would want to explore multiple lenders, comparing their mortgage products and the interest rates they quote. This is where working with an online mortgage broker such as STEM Lending helps you save. You can compare multiple options with much lesser time spent as compared to shopping offline. Explore options here:

What are the factors influencing the prequalification amount?

Factors that influence the dollar value of pre-qualification by a lender include:

  • Credit score
  • Monthly disposable income
  • Financial assets; and
  • Overall debt at the time of application.

It is essential to build up a strong credit score and monitor your credit before applying for pre-qualification. To learn more, check out STEM Lending’s article on credit report monitoring: Proactively monitor credit report before seeking mortgage.

A key metric to understand regarding mortgage pre-qualification is your monthly Debt-to-Income ratio, often abbreviated as DTI. The debt-to-income ratio is: (Sum of all the Monthly Debt Payments) divided by (Gross Monthly Income).

This number is measure by which lenders assess your ability to repay the mortgage, since a high debt-to-income ratio can render the borrower miss a scheduled mortgage payment in the event of a large unforeseen expense, increasing the potential likelihood of default.

Common metrics that are included in monthly debt payments, thereby impacting the DTI, include:

  • Monthly payment on new mortgage
  • Student loan payments
  • Credit card payments
  • Auto loan payments
  • Home appliance loan payments; and
  • Other recurring debt payments present in credit report.

Lenders may set DTI thresholds for mortgage applicants and many lenders may not pre-qualify applicants with Debt-to-Income ratio greater than those thresholds. To learn more about DTI, and how it impacts your mortgage application, check out STEM Lending’s article: Explaining Debt-to-Income “DTI” and Its Importance.

Notably, other factors also indirectly impact the DTI by means of monthly mortgage (Debt) payment. These include:

  • Approved mortgage interest rate
  • Loan-to-value ratio (LTV)
  • Credit score
  • Property usage
  • Late payment history and
  • Any foreclosures or bankruptcies on record

Pre-qualification is not the same as Pre-approval

First-time home buyers should note that mortgage pre-qualification is not the same as pre-approval. Pre-qualification is a conditional approval of the mortgage — an estimate of how large a mortgage one can afford. However, it doesn’t create a binding commitment between the home-buyer and the lender. Pre-approval, on the other hand, involves a detailed review of applicant’s debt, income, assets and credit history and the borrower can receive a Pre-Approval Letter documenting the amount that the borrower has been approved to borrow. To learn more about differences between Pre-approval and Pre-qualification, read STEM Lending’s article: Mortgage 101: Pre-approval vs. Pre-qualification Letter.

To take the first step in getting prequalified for a mortgage and save on your mortgage, contact STEM Lending for a free initial consultation:

  1. Message:
  2. E-mail:
  3. Call: +1 (833) 600-0490 (toll free)

STEM Lending also offers simple and free mortgage calculators for you.

Wishing you a happy home buying experience!

– STEM Lending Team

Mortgage Refinance Perspectives

Mortgage Refinance 101: when to refinance and why?

Refinancing a mortgage can potentially be a great financial strategy, especially when the original mortgage was purchased at relatively unfavorable terms.

However, there are definite costs associated with pursuing a refinance transaction, which is why its important to understand when to refinance and why. In this STEM Lending post, we cover why you should consider refinancing the mortgage and if so, when is a good time to refinance.

So lets cover the basics: what really is refinancing a mortgage? Refinancing refers to replacing an existing mortgage with another mortgage under different terms. In US, refinancing terms may vary based on economic factors, including projected risk and borrower’s credit worthiness. Usually refinancing is done for borrower’s primary residency mortgage.

Interest rates are currently close to all-time low (see figure below on Average US 30-year Fixed Mortgage rates), therefore mortgage refinancing remains a good option for many homeowners, especially if you bought your mortgage before the 2008 financial crisis:

Refinancing programs in United States

There are several mortgage refinance programs available in the United States, including:

  • Adjustable Rate Mortgage (ARM): You may chose to refinance to an adjustable rate mortgage if you project interest rates may go down in the future. As we highlighted earlier, current interest rates are already at historic lows so substantial future reduction in interest rates is unlikely.
  • Fixed Rate Mortgage: By refinancing to a fixed-rate mortgage can help you plan for monthly mortgage payments well in advance thereby helping you set a budget with predicable cash flows.
  • Cash Out Refinance: Using cash-out refinancing, you can convert part of your home equity into cash, which can be used for expenses such as home repairs
  • HARP: Federal Housing Finance Agency’s Home Affordable Refinance Program helping home-owners experiencing significant drop in their home values refinance with better mortgage terms.
  • FHA Streamline: refinancing existing FHA-insured mortgages requiring limited borrower credit documentation and underwriting.
  • USDA Streamlined Assist Program: available to existing USDA home loan borrowers, by US Department of Agriculture (USDA), providing more affordable refinance payment terms to borrowers with low or no equity.
  • VA Cash-Out Refinance Loans: providing qualified veterans an opportunity to withdraw cash for a near term need from their existing conventional or VA loan.

Two important factors to keep in mind regarding refinance are: (i) Refinancing resets the clock on your mortgage, so a fresh 30-year refinance on an existing 30-year mortgage will extend the mortgage duration to a fresh 30-year duration from the day of refinancing closure, although at a potentially lower interest rate and monthly payment. (ii) There are transaction costs associated with accomplishing a refinance, including a concept of points as we discuss below. Even with mortgage clock reset and transaction costs, refinancing can potentially be a valuable financial decision, for following reasons:

Motivation for refinance

Mortgages can be refinanced for multiple reasons:

  1. Reducing monthly payments by lowering the interest rate.
  2. Debt consolidation of multiple mortgages into one for a potentially different term based on prevailing interest rates.
  3. To reduce the risk of rate fluctuation, switching from an adjustable rate mortgage to a fixed-rate mortgage.
  4. To make cash accessible by altering the terms of mortgage (cash-out refinancing).

Also note that there can be potential tax benefits available with refinancing, particularly if the borrower doesn’t owe the Alternative Minimum Tax.

How do you proceed with refinancing? We recommend you to reach out to a licensed professional mortgage broker who can help discuss your mortgage options and guide you whether you will benefit from a mortgage refinance.

To explore your refinancing options with STEM Lending in more detail, we encourage you to reach out to or contact us via / +1-833-600-0490 (toll free), if you have any questions regarding refinancing. We offer free initial consultation to discuss your mortgage options. We also offer a number of handy mortgage calculators to help you compute the mortgage monthly payments and other analytics.

Mortgage Points

A fraction of the net mortgage value is often required to be paid upfront for refinancing. Usually, this fraction is expressed as percentage of  the mortgage amount and is referred to as points, i.e. 1 point equates to 1% of total mortgage amount. Larger upfront payments for refinance (i.e. larger number of points) often yield reduction in interest rates in the refinanced loan.

For further information, feel free to contact us:

  2. Mortgage Calculators – Essential for financial planning

Wishing you a happy home buying experience!

– STEM Lending Team

Home Mortgage Calculator Perspectives

Mortgage Calculators – Essential for Financial Planning

Mortgage calculators enable us to measure how changes in mortgage terms will impact our future financial outlook. They form an essential tool during the mortgage process, helping homebuyers identify the best terms for their mortgage. Lets get familiar with them.

Key factors in mortgage calculations include:

  • Mortgage Principal
  • Loan Balance
  • Compound Interest Rate
  • Number of Payments per Year
  • Total Number of Payments; and
  • Regular payment amount

STEM Lending Mortgage Calculators

We at STEM Lending offer a number of mortgage calculators for your ready use. Check these:

Further advanced mortgage calculators incorporate other costs associated with a mortgage, including insurance and such as local/state taxes.

Fixed Rate Mortgage Calculators

Monthly payments for a fixed rate mortgage are the amount paid by the borrower every month that ensures that the loan is paid off in full with interest at the end of its term.¹With a fixed rate mortgage, the borrower agrees to pay off the loan completely at the end of the loan’s term, so the amount owed at month N must be zero. The monthly payment formula is based on the annuity formula, depending on:

  • The monthly interest rate, expressed as a decimal, not a percentage. Since the quoted yearly percentage rate is not a compounded rate, the monthly percentage rate is simply the yearly percentage rate divided by 12; dividing the monthly percentage rate by 100 gives r, the monthly rate expressed as a decimal.
  • The number of monthly payments, called the loan’s term, and
  • The amount borrowed, known as the loan’s principal.

The fraction of the monthly payment that is applied to principal pay down equals the amount of payment minus the amount of interest currently paid on the pre-existing unpaid principal.¹

The interest component of the monthly payment, is the interest rate times the amount unpaid at the end of month. Since in the early years of the mortgage the unpaid principal is still large, so are the interest payments on it. The portion of the monthly payment going toward paying down the principal is very small and equity in the property accumulates very slowly (in the absence of changes in the market value of the property). But in the later years of the mortgage, when the principal has already been substantially paid down and not much monthly interest needs to be paid, most of the monthly payment goes toward repayment of the principal, and the remaining principal declines rapidly.

The borrower’s equity in the property equals the current market value of the property minus the amount owed.

Adjustable Rate Mortgage Calculators

Annual percentage rates (APR) calculations for Adjustable Rate Mortgages (ARMs) require many more variables, including: the starting interest rate; the length of time at that rate; the recast; the payment change; the index; the margins; the periodic interest change cap; the payment cap; lifetime cap; the negative amortization cap; and others.¹

In the forthcoming STEM Lending blog posts, we will dive deeper into these steps and the gotchas that you need to watch out for. Please feel free to reach out to or contact us via if you have any questions.

Wishing you a happy home buying experience!

– STEM Lending Team


  1. Mortgage Calculator
  2. Payment / Amortization Calculator: Showing your monthly payment for fixed rate or adjustable rate loans.
  3. Rent vs. Own Calculator: Comparing the estimated costs of buying vs. renting a home.
  4. Annual Percentage Rate (APR) Calculator: Calculating the annual percentage rate for a loan.
  5. Debt Consolidation Calculator: Calculating the effect of combining other debt with your home mortgage.
  6. Prepayment Savings Calculator: Estimating how additional mortgage payments reduces your interest costs.
  7. Early Payoff Calculator: Computing the additional payment required to pay off your loan early.
  8. Refinance Break-Even Point Calculator: Calculating the number of months to break-even if you refinance.
  9. Tax Savings Calculator: Estimating your early tax savings resulting from property.
Couple's Home Perspectives

Learning basics of mortgages can help you save

Owning a home is a dream of many Millennials throughout the United States. However, with the ever increasing cost of education and ballooning student debt, homeownership often begins with seeking a substantial mortgage.

When it comes to mortgage, making uninformed financial decisions can not significantly harm our financial future, it can even lead to bankruptcy and foreclosure of our homes.

While the world of mortgage may seem mystical and daunting at first, mortgage-focused information and products are readily available on the Internet. It empowers us to become familiar with basics of how mortgage works, well before we apply for one. With this motivation, we will publish a series of articles helping prospective homebuyers navigate the entire mortgage process.

First, lets learn the basics. Broadly, the mortgage process involves:

  1. Loan Application
  2. Home Inspection
  3. Home Appraisal
  4. Home Insurance
  5. Title Search
  6. Rate Lock-in
  7. Mortgage Terms Review
  8. Down-payment
  9. Closing Costs Payment
  10. Review Closing Documents

Loan Application

With the help of mortgage brokers or lenders, home buyers fills in a Uniform Residential Loan Application, which specifies the following pieces of information required for reviewing the mortgage application: the type of mortgage, terms of loan, property information, purpose of loan, borrower/co-borrower information, employment information, monthly income and combined housing expense information, assets & liabilities; details of transactions; and certain required and optional disclosures. Once the loan application is received by the lender, the subsequent steps in the process outlined above ensues.

If any element of the loan application was inadequately filled, the lender may ask clarifying questions to complete all the required fields in the mortgage application.

Home Inspection

Home inspections are non-invasive examinations of structural conditions of a home. The inspection may include any combination of mechanical, structural, electrical, plumbing, or other essential systems or portions of the home, as identified and agreed, prior to or during the inspection process.

As home inspections are based on visual observations, they only reveal material defects observed on the day of the inspection and not all material problems that have existed in the past. They help home buyers in identifying material defects in a property that can potentially have an unreasonable risk to residents. Notably, home inspection is different from home appraisal as a home inspector determines the condition of it’s structure, whereas an appraiser determines the value of the property(see below).

Home Appraisal

A home appraisal is an unbiased professional valuation of a home’s fair market value. Lenders order an appraisal during mortgage application to ensure that the loan amount requested by the borrower is based on home’s fair market value. A fair estimate of home’s value is important because in the event of a borrower’s default, the lender may need to foreclose and sell the property in the market.

Home Insurance

Mortgage lenders typically require that home buyers purchases home insurance in order to protect the lender if the home is destroyed. Certain perils may or may not be covered as a part of the home insurance policy, including fire, lightning, windstorm or hail, explosion, smoke, vandalism, aircraft or vehicle collision, riot or civil commotion. Notably, flood insurance and other calamities are often not included in home insurance plan, and its important to give due attention to whether buying flood insurance or other will be valuable.

Title Search

A home’s title search is the process of retrieving documents evidencing events in the history of that home’s sale. The goal of title search is to ensure that the person selling the home has the right to sell it and that the home buyer is getting all property rights.

Rate Lock-in

In the rate lock-in step, the borrower locks in the mortgage interest rate with the lender. This step happens no later than 10 days prior to the mortgage closing date.

Mortgage Terms Review

The borrower reviews the terms of the mortgage presented by the lender, to ensure all terms and documents concerning the mortgage are in order. This step happens once the home inspection, home appraisal and title search are completed with no discrepancies observed and the mortgage is approved by the lender. If there are any issues observed during the title search/home inspection/home appraisal, they need to be resolved before the mortgage gets approved.

Down Payment

Once the mortgage is approved and the borrower has reviewed mortgage terms, the borrower will need to deposit the down payment with the lender, which is usually done via wire transfer or cashier’s checks.

Closing Costs Payment

Closing costs are the fees associated with home purchase that are paid by home buyers at the closing of the mortgage transaction. Note that Closing refers to the point in time when the property’s title is transferred from the seller to home buyer.

Closing costs usually have a multitude of fees and they are incurred by either the buyer or seller, so its important to get fully familiar with them beforehand and identify which. They may include:

Attorney Fees; Title Service Costs; Recording Cost; Document/Transaction Stamps or Taxes; Survey Fee; Brokerage Commissions; Mortgage Application Fees; Points; Appraisal Fees; Inspection Fees; Home Warranties; Private Mortgage Insurance; Pre-paid Homeowner’s Property Insurance; Pro-rata property taxes; Pro-rata property taxes; Pro-rata Homeowner Association Dues and others.

Review Closing Documents

In the review step, homeowners review all the documents associated with closing and fulfill homeownership.

In the forthcoming STEM Lending blog posts, we will dive deeper into these steps and the gotchas that you need to watch out for. Please feel free to reach out to or contact us via if you have any questions.

Wishing you a happy home buying experience!

– STEM Lending Team

For further information, see these references: