What You Need to
Know About Getting a Mortgage
Not many potential homeowners can pay cash for their new
home. Most home buyers need to take out a mortgage, a loan for the specific
purpose of buying a home. Usually about 80 percent of the home’s value is
borrowed, and this is known as the beginning principal. Other fees associated
with the mortgage include taxes, interest, and mortgage insurance. Mortgages
involve large sums of money and can be tricky to navigate, especially for
first-time home buyers. Making yourself familiar with the ins and outs of
obtaining a mortgage can help you in the lending process.
Your Credit Score
Matters
Credit scores show the responsibility and reliability of the
consumer. A good credit score can help you get the best rates possible for your
mortgage. If your credit score falls below 620, you could get penalized with
higher interest rates or, in some cases, not get a loan at all. Check on your
credit score prior to applying for a mortgage and do what you can to repair the
score. Limit your credit card usage and pay off any excess debt if possible.
Find a Reputable
Lender
Although most mortgage lenders are trustworthy and
dependable, some may try to trick you. It is important to shop around before
committing to a lender. First of all, compare rates of different lenders to
determine the best deal. Ask questions about the lending process to get a feel
for the personality of the lender. Always read the fine print before signing
anything; you could be signing off on hidden fees. If you don’t understand
everything about your mortgage papers, have them looked over by a professional.
Get Pre-Approval
There are two major benefits to mortgage pre-approval. Pre-approval
gives you an idea of how much you can afford before beginning your home search.
Without pre-approval, you could get deep into the buying process only to find
out it is well beyond your financial limits, which would be unfortunate for
both you and the hopeful seller. Having mortgage pre-approval gives you more
bargaining power over other potential buyers if you are not the only one
interested in a home. With pre-approval, you could potentially lower the asking
price.
Applying for a mortgage can seem like an intimidating
process, but with the right information and honest people working on your side,
it is just one more exciting step toward home ownership. Keep your credit score
in check before beginning the mortgage search, do your research before settling
on a lender, and get a pre-approval letter before making an offer on a home. These
steps can greatly help you in the search for your dream home.
