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.
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.