5 Tips for Getting a MortgagePosted on Apr 09, 2019
There are many who don't know a thing about getting a mortgage. They see reports on the news about changes to home prices and the interest rate, and then will hesitate to make a decision about buying a home. Nevertheless, getting a loan for a home is very different than other forms of credit. A person who does not know these difference may become frustrated and disappointed.
A mortgage loan will likely be the largest and most meaningful financial commitment over your lifetime. Therefore, in addition to acceptance, you will want to get the best terms possible. Fortunately, there are many ways to not only help both get accepted and receive the best deal. Educating yourself is key.
Follow these tips to help get the mortgage you want.
1. Check Your Credit Score - Obtaining a copy of your credit report from Experian or Equifax is an essential first step. If your credit score is not where it should be, take action to improve it. Issues such as missed and late payments, large numbers of credit cards, and high debt can impact your ability to get approved. Cleaning up your credit report and fixing any errors are key for a home loan approval.
2. Save for a Downpayment - Depending on the type of loan, a required downpayment can range from zero to 20 percent. However, having little to no money saved for a downpayment may still impact both your ability to get approved and the interest rate you receive. Still, there are other costs in getting a home, such as appraisal fees, home inspections, title search and so on. These additional costs range from 2 to 5 percent of the mortgage balance.
3. Maintain a Good Work History - The longer you have worked at the same employer, or within the same industry, the better. Banks and other lenders will use your work history as part of the approval process. Quitting your job to become a freelancer or accepting a lower paying job may have a negative impact, especially if the change is during the process of buying a home.
4. Understand What You Can Afford - Generally speaking, you will want to look for a new home that is 2.5 times your annual salary. The typical home buyer will place 10 percent down and will select a traditional 30-year loan. However, making different choices can actually save you hundreds of thousands in interest. Of course, shorter terms will result in a larger monthly payment. So, you must take that into consideration.
5. Evaluate Your Options - There are many more choices than just deciding between a 15-year or a 30-year mortgage. For example, first-time buyers and those with less than stellar credit may want to opt for an FHA loan, which requires a smaller downpayment and has different credit requirements. However, you must remember that paying less upfront will significantly impact how much you pay over time.
What haven't we covered yet that is important to you? If you would like more tips for getting a mortgage, or would like to discuss a related topic, please contact us.