Not everyone’s dream house is a small colonial on a quiet street in the suburbs with a red door and a white picket fence. Some people want lots of bedrooms, a private bathroom for everyone in the house and maybe a pool and a tennis court. If you’re one of the lucky ones that can afford such a property, you’ll need a pretty big mortgage. When you start talking about mortgages more than $1 million, you need to make sure you’re ready for such an undertaking. Even when you’re ready to take the plunge, you need to find the right lender.
Calculate the approximate amount you will need to borrower. For example, a house listed at $1,500,000 can require up to 20 percent down. This means you would put $300,000 of your own money down and apply for a mortgage of $1,200,000.
Contact lenders to find one who will grant mortgages of more than $1 million. Ask if the size of the loan carries higher interest or additional fees. Compare companies and choose the one that best suits your needs.
Review your budget to ensure that you can afford the payments on a $1 million-plus mortgage. Use a loan calculator to determine your monthly payments. For example, a loan at $1,200,000 at six percent carries a payment of $7,194.61 per month. Don’t forget to add your monthly real estate taxes and homeowners premium to that amount.
Fill out the bank’s mortgage application. Be sure to indicate the amount and terms you want. For example, you want a loan no greater than $1,200,000 for the next 30 years. The bank will set the rate.
Provide your tax returns and W-2s to the bank. The bank will use this along with the credit report to determine if you qualify for the loan. The bank will want to see that your debt comprises of no more than 40 percent of your income. For example, if your monthly payment with taxes and insurance is $9,000 and you have no other debt, you need to show a monthly income of at least $22,500.
Provide bank statements to the lender. The bank wants to see that you have the down payment ready and available. Your statements need to reflect that you have at least $300,000 in readily available funds.
Sign a commitment letter upon approval. The letter will outline all the terms and conditions of the loan. If you agree, return the signed letter to the bank and set a closing date.
Attend the closing and sign the loan documents. The number and type of documents will depend on the lender. Once the documents are signed, you have three days to change your mind and cancel the transaction. If not, congratulations, you now have a $1 million-plus mortgage.