Buying a home is a big investment in your life and if considering purchasing one in the near future you should improve on your mortgage knowledge to avoid making mistakes. Get to know what is required before applying for a mortgage, what to watch out for during the home purchase process, and how to use a mortgage after you have bought your home. Here are some points you should consider before signing for a mortgage loan application:
• Your credit score
Before you begin searching for houses, you should know your credit score. This is one of the major factors in determining whether your mortgage application will be approved or not and what interest rate you will end up with. The higher your credit score, the lesser interest rate you will pay. You can get your credit report from any of the three major credit agencies. You can access one free report from the credit agencies every year. If your credit score does not qualify for a mortgage you should first focus on improving it.
• How much you can afford
Run your own mortgage calculations to know how much you can afford to pay towards your monthly mortgage payment. Monthly mortgage payments depend on your income. The monthly housing costs include property taxes, homeowners insurance, maintenance and utility bills. Closing fees are usually included into mortgage loans. The estimate of what you can afford should be more than the principal and interest payments.
• What type of mortgage is right for you
Shop around for the best mortgage options available. Brush up on your mortgage knowledge and learn things such as: what does a 30-year fixed rate mortgage mean, what is a hybrid mortgage, what is the interest charge or the closing fee. Make sure you understand all the terms before agreeing or signing anything. Consider your financial position, and know what is achievable even in the future. If you are planning on living in the new home for a short term, it might be wise to choose a mortgage that won’t put you in financial strain in future. Also consider a mortgage that matches and fits your individual credit profile.
• What special loan programs are available?
You might qualify for a VA loan or an FHA loan. These are loan programs offered by the government. They are beneficial since they reduce the risk to mortgage lenders, which is an opportunity that you might not get with other mortgage lenders. Some states also have programs for first-time homebuyers or rural areas homebuyers. You can also find out whether your city offers programs such as “sweat equity” that help pay for your first home, reducing the amount of money you need to borrow for your first mortgage.
• Which offer is the best deal?
Ensure to shop around before deciding on a mortgage lender and signing an official mortgage application. Inquire about closing fees and other costs, and find out what is the exact amount being charged. You can then compare information from various mortgage lenders, on the type of loan that you want. Shopping around will help you get the best deal on your mortgage loan.