You’ve probably heard of home buyers turning to a home mortgage loan to help them finance purchasing a home. Unless you can pay cash for the full asking price of a home, you’ll need to consider a home mortgage loan. This loan comes from a bank or lender to cover the initial investment of your home’s cost. You then repay the funds, with interest, over the span of several years by making monthly payments back to the lender. Check out these basics of a home mortgage loan before you contact a potential lender.
Your Credit Score Matters
Your credit report plays an important part in determining how much of a loan you qualify to receive. You want your credit to be in the best shape possible before you even think about visiting a lender. They will carefully inspect every part of your report and take note of any delinquencies, past due accounts, and maxed out credit lines. Take some time to bring those accounts current and report any errors to the credit agencies before you move further. Federal law allows you to receive a free copy of your credit report once a year to make it easier to keep tabs on the shape of your credit history.
Don’t Make Major Changes
Avoid making any large purchases, like a vehicle or expensive jewelry, as it can negatively impact your ratio. You also want to avoid changing jobs now. Showing that you have a stable work history and can maintain a steady source of income over time shows lenders that you are a good candidate for a loan.
Save Some Money
It is a good idea to save up some money to use for expenses that may pop up along your home buying journey. Part of having a home mortgage loan means that you are responsible for paying for your down payment out of pocket. A down payment is typically about 20 percent of a home’s selling price. Some lenders offer programs that allow for reduced or no down payments. If you qualify for one of those plans, carefully consider the pros and cons of having a higher interest rate vs. just covering the cost of the down payment yourself. In addition to a down payment, you may be responsible for covering closing costs as well, which fall at around 2 to 8 percent of the selling price.
Research Mortgage Rates
When choosing a home mortgage loan, you want to take into consideration the interest rates that come along with each option. Some loans have a fixed mortgage rate, while others offer a variable mortgage rate. If having a consistent monthly payment during the life of your mortgage is important to you, a fixed rate loan could be the right choice. If you’re open to having a monthly payment that can vary based on adjustments in the market, you may seriously be considering a variable rate loan. Your real estate agent can sit and go over the pros and cons of each type of loan with you before you decide which is the best option for you.
Decide on Length of Time
Just as interest rates vary from loan option to loan option, life spans vary as well. Typical time spans for the life of a home mortgage loan are ten, fifteen, or thirty years. If paying off the home at a faster rate is more important than smaller monthly payments, you’ll want to choose a shorter life span. Some loans have early payoff penalties, so make sure to read through the terms of your loan carefully before you sign the dotted line. Research your options and don’t be afraid to ask questions if anything confuses you.
Shop Around for a Loan
Choosing who you want to use as a lender for your home mortgage loan is the most important part of receiving a loan. You want to find the best rates and loan terms without compromising on the quality of customer service. Take the time to research reviews from home owners before you settle on a lender.
Your real estate agent is the best source of information about the local community and real estate topics. Give Morris Real Estate Group a call today at 253-292-2221 to learn more about local areas, discuss selling a house, or tour available homes for sale.