If you’re lucky enough to pay cash for your home, you’re one of the few who won’t have need of a home mortgage loan. Otherwise, you’ll want to consider another option when it comes to buying your dream home. Securing a home loan is the preferred choice for many people. You borrow money from a bank or lender and repay the loan amount by making monthly payments. Check out these home mortgage basics before you visit the bank.
Check Your Credit
Be prepared for the mortgage loan process by knowing your credit score and the current state of your credit report. The lender uses this information to determine your credit-worthiness and reliability. Delinquent accounts can delay your home purchase because they give the impression that you don’t repay your debts. Order a free copy of your credit report from the three major credit reporting agencies each year thanks to the Fair Credit Reporting Law. Report any errors you find and take care of overdue accounts.
Making Major Changes
Your credit report tells more about you than just how well you pay your bills. It gives information to the lender about your stability when it comes to keeping a job. For this reason, it’s wise to postpone any changes to employment during this time. Avoid large purchases that require monthly payments before your home mortgage application. This type of change adjusts your income to debt ratio.
Add Money to Savings
Though the mortgage loan amount covers the cost of the property, you’ll need cash on hand for the down payment, closing costs, and moving expenses. The down payment is around 20-percent of the price of the home, and the closing costs will run you between two and eight percent. The closing costs include fees for inspections, appraisals, and service expenses. In some cases, the seller agrees to pay the closing costs, but you should be prepared to pay these out-of-pocket.
Check Mortgage Rates
Don’t settle on the bank as a default choice. Research lenders in the area to learn their terms. Take note of the differences between mortgage loans while you are researching. A fixed rate loan offers a bit of stability for those who prefer a monthly payment that doesn’t change over time. The interest rate is locked in at the date of the loan. A variable rate loan may come with a lower interest rate at the beginning, but your monthly payment amount changes as interest rates fluctuate. Choose the type of loan that fits your lifestyle and budget plan.
Select a Repayment Option
Another consideration is the repayment period of the loan. If you can afford a higher monthly payment, you may want to choose a shorter repayment period. Some buyers prefer a smaller monthly payment with a longer loan term. Typical loan terms are ten, fifteen, and thirty years. Ask about early payoff penalties when doing your research. It’s best to know about these details before you decide which loan is the best fit.
Choose a Lender Wisely
You are free to choose the bank or mortgage lender that has the best options for your needs. Don’t be shy about asking for clarification of terms if you feel unsure. Your home is a significant investment, and the process deserves serious research.
Your real estate agent is the best source of information about the local community and real estate topics. Give the Maria Thorn Team a call today at 225-933-9542 to learn more about local areas, discuss selling a house, or tour available homes for sale.