You’ve worked hard to afford the home of your dreams. Still, you may not be able to pay cash for the purchase. Many people must secure a home mortgage loan. When you secure a home mortgage loan, you are agreeing to repay the sum of money borrowed along with any interest applied to that amount. The loan us typically repaid using monthly payments. Loan types differ, and it’s a good idea to know the basics of home mortgages before you begin the home buying process.
To see if you are credit worthy, a home mortgage lender will take a close look at your credit score and your credit report. They will look for delinquent accounts, bankruptcies, repossessions, and judgements. It’s a good idea to order a copy of your credit report from all three of the main credit reporting agencies to check for errors and accounts that need your attention. The three main agencies are TransUnion, Experian, and Equifax.
The lender will consider your income to debt ratio before deciding to approve or deny your mortgage loan. For this reason, you should avoid making large purchases that require monthly payments before and during the home buying process. The lender uses your credit report to check for job stability. Choosing this time to switch jobs would be a pretty bad idea. They need to know that you are reliable and have the means to repay the loan.
Even with the mortgage loan, you will need cash on hand to cover some expenses like the down payment and the closing costs. The typical down payment is 20 percent of the selling price of the property. Consider adding more to your down payment if you want to lower your monthly payments. Closing costs include fees for services associated with your home buying transaction. The closing costs are typically between two and eight percent of the selling price of the house. Focus on adding a substantial amount to your savings account when you begin thinking about purchasing a house.
There are differences when it comes to mortgage loan rates. You may feel obligated to secure a home mortgage loan where you bank, but this isn’t always the best option. Shop around and do your research at other banks and lenders. You could find there are better terms elsewhere.
You’ll need to choose between a fixed rate loan or a variable rate loan. If you choose a fixed rate loan, the interest rate remains the same for the life of the loan. Your payments remain the same from month to month. You can expect to pay a higher interest rate on these types of loans. If you choose a variable rate loan, the interest rate changes along with the market. Your monthly payment amount will fluctuate along with the interest rates.
There are special mortgage loan programs available for some people with special circumstances. It’s worth your time to see if you qualify for any of these programs available for first-time home buyers, military members, and veterans. Also, check with your real estate agent to learn more about FHA loans, VA loans, and any other loan programs they have knowledge of before you begin the home buying process.
With a bit of preparation and research, you’ll be ready to tackle the mortgage loan part of buying a home without adding stress to the process. Since your home mortgage loan is a long-term commitment, it deserves your full attention and serious consideration.
The best source of information about local communities and real estate topics is your real estate agent. Give Brianna Ruelas a call today, for Grand Rapids call 616-272-9198 or Phoenix call 480-500-9395 to learn more about the area, to discuss selling your house, or tour available homes for sale.