One of the largest purchases you’ll make during your lifetime is a house. This experience is part of the American dream, and it can be an exciting time. It can be daunting when it comes to financial concerns. Most people aren’t able to pay cash for a house, and this is where a home mortgage loan comes in handy. A home mortgage loan is when a buyer borrows money from a lender with the purpose of buying a home. These loans vary. Before applying for a home loan, do a bit of research to find the best lender to fit your needs.
When you apply for a home mortgage loan, they will check your credit score and history. It’s a good idea to plan ahead and get a copy of your credit report. Check to make sure there are no errors. Repair any negative items. Unpaid and late items can have a negative impact on your ability to secure a home loan. Lenders prefer to see a history of positive reports and payments.
Take care not to make any major purchases during this time that could make a difference in your debt to income ratio. Avoid changing employers during this time. A lender wants to see a stable work history when they check your credit report. This lets them know that you have the ability to repay the loan in a timely manner. If your credit is lacking, you may be able to use a co-signer to get a loan. In this case, the co-signer would be responsible for the balance of the loan if you are unable to pay.
You will most likely be required to make a down payment as part of the loan conditions. These are typically around twenty percent of the price of the home. If you’re able to pay more, your monthly mortgage payments could be lower. You’ll need to pay closing costs that cover appraisals, inspections, and legal fees. Consider this when you’re managing your savings. Closing costs are typically between one and either percent of the price of the house. The lender provides an estimate of these charges ahead of time, but keep in mind that these costs are subject to change.
As the home owner, you will be required to secure insurance to protect the property’s value. Consider the cost of this insurance when you’re figuring out your budget. This will keep you from being overextended financially. Property taxes are a consideration, as well. Paying attention to these when you’re seeking a home mortgage loan will keep you on from being caught unaware.
You can choose between a fixed rate loan or a variable rate loan. With fixed rate loans, the interests’ rates remain the same throughout the life of the loan, regardless of real estate market changes. The advantage here is that you will always know what your payments will be, and they will never increase. The disadvantage is that the rate for these loans is higher overall. Variable rate loans can change during the life of the loan. This means you may begin with a low-interest rate that changes as the real estate market changes. Monthly payments could increase.
Other home mortgage options include programs for first-time home buyers and military veterans. Talk with your lender about FHA and VA loans if you feel you may qualify for one of these.
Buying your home should be an exciting time, not one wrought with trepidation. Know what you can afford, prepare your credit in advance, save funds for down payments and closing costs, and do your research regarding fixed vs. variable rates. As always, check with your real estate agent for any questions you have about the home buying process.
To find out more about home mortgage loans, or to tour available homes for sale, call the Bogle Realty Group at 909-762-5861.