When it comes to paying for your new home, you have two choices. You can pay cash or secure financing for the selling price. Getting a home mortgage loan is the best option for most people. The bank or lender pays the sale price, and you make monthly payments to the bank. Before you contact a lender, check out these basic facts about home mortgage loans.
Check Your Credit
A mortgage lender checks your credit score and credit report to see if you’re reliable and prove to be a desirable candidate for the loan. Delinquent accounts cast a shadow of a doubt that may delay your home purchase. Be prepared! The Fair Credit Reporting Law allows each person to order one copy a year from each of the three major reporting agencies. Catch any errors and report them immediately. Make plans to pay off outstanding debts.
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
The mortgage loan covers the cost of the home, but you are required to pay expenses not included in the loan amount. The down payment on a home is typically 20-percent of the selling price. Closing costs run between two and eight percent. Closing costs include fees from attorneys, appraisals, inspections, and other services needed during the home buying process. There are some cases when the seller agrees to pay the closing costs, but you should be prepared to pay them. If you find yourself in a bidding war, being able to cover the closing costs may give you the upper hand.
Check Mortgage Rates
Don’t settle on your bank as the default choice. Research other lenders in the area to learn about their terms. You should 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.
The best source of information about local communities and real estate topics is your real estate agent. Give Norber Real Estate Group a call today at 248-785-3737 to learn more about the area, discuss selling your house, or tour available homes for sale.