Are you thinking about purchasing a home? Do you need to refinance your current home loan? If you have to take on a loan to have the financing you need to buy, you will be needing a mortgage. The whole process can be confusing, but with some knowledge, it can be a lot easier.
It is important to get pre-approved for you home loan before you start looking at properties. Look around so you know what your price range is. After you get all this information, then you can sit down and determine what is affordable each month.
Pay down your current debt and avoid gaining new debt while going through the mortgage loan process. When you have a low consumer debt, you can get a mortgage loan that’s higher. Carrying a higher debt may mean being denied for the application you’ve placed for a mortgage. Carrying high debt can result in a higher interest rate on your mortgage and cost you more money.
If your financial situation changes, you may not be approved for a mortgage. You should have a stable job before applying for a mortgage. Don’t change jobs during the mortgage process either, or your lender may decide you are no longer a good risk.
Good credit is needed for a mortgage. Lenders consider how much risk they are taking on you based on your credit report. If you’ve had poor credit, do whatever it takes to fix it so your loan is not denied.
If your mortgage is a 30 year one, think about making extra payments to help speed up the pay off process. That additional money will go towards the principal on your loan. Making an extra payment often gets your mortgage paid off faster and saves you money on interest.
Ask those close to you to share their home mortgage wisdom. It is likely that they will offer advice in terms of what to keep watch for. Some may share negative stories that can show you what not to do. The more contacts you connect with, the better information you will have.
Interest Rates
Watch interest rates. Although interest rates have no bearing on the acceptance of a loan, it does affect the amount of money you will pay back. Figure out what the rates are and know what they’re going to cost you monthly and overall when all is said and done. If you don’t pay attention to them, you might have a higher monthly payment than you intended to have.
The easiest mortgage to obtain is probably the balloon mortgage. These types of loans are short term and when the loan expires, the mortgage must be refinanced. This can, however, prove to be quite risky as rates may increase, or your finances may take a turn for the worse.
Do a little research on the mortgage lender you may be working with before you sign anything. Never put blind faith in a lender’s representations. Check around. Do some research on the Internet. Call the BBB to find out what they say. You need to go into this loan with as much knowledge as you can so that you can save as much money as possible.
Adjustable rate mortgages, also known as ARM, don’t expire when the term is up. Instead, the rate is adjusted to match current bank rates. This could put the mortgagee at risk for ending up paying a high rate of interest.
When looking for a mortgage, do not limit yourself to banks only. Sometimes family can help you out with a loan. Credit unions can sometimes offer better interest rates than traditional lenders. Think about every option as you compare your choices.
If you get denied at a bank or a credit union, consider a mortgage borker. Many brokers can find mortgages that fit your situation better than these traditional lender can. They check out multiple lenders on your behalf and help you choose the best option.
Make sure your credit looks good in advance of trying to secure a mortgage. Good credit is a must. They want to make sure they will be repaid. Clean up your credit before applying.
Getting a loan pre-approval letter can impress a seller while showing them you are prepared to buy. Such a letter shows the seller that you are financially able to buy their home. Make sure you get approved for the right amount. If it goes higher, then the seller is going to expect more.
You might have to investigate alternative sources as a means of getting a mortgage approval if your credit is bad, thin or nonexistent. Keep your payment records for several years. Proving a steady record of paying utilities and rent is good for borrowers who have poor credit.
Before you select a mortgage broker, do a check at the BBB. There are many predators out there that could try tricking you into higher costs, fees, and interest rates. Be wary of brokers who are asking you to pay a very high fee or a lot of points.
If you go with a fixed rate mortgage, your mortgage broker gets a larger commission. They could try to intimidate you into taking the ‘locked in’ rate by scaring you with potential rate hikes. Avoid this fear by understanding the true terms and taking your mortgage out based on the facts.
Ask for word of mouth recommendations to a good mortgage broker. They can give you tips on what to look out for and also point you towards someone who they’ve previously worked with. It is still wise to shop around even after you get the referral though.
With the information shared in this article you know now a little bit more about home mortgages. When you choose to start the mortgage application process, put this information to work for you. Owning your home is within reach; don’t let the process intimidate you.
