How To Prepare Yourself For A Mortgage
So it’s time to start looking for a mortgage, where should you start? Here are some great tips and tricks to get you the perfect mortgage.
Check and Clean Up Your Credit Score
Your credit score will determine your interest rate and what loan programs you qualify for. Different programs have different credit requirements, with FHA (Federal Housing Administration) loans being the most flexible.
Checking your credit score and determining which debts to payoff, before you get started, will help you to save money over the life of your mortgage.
Familiarize Yourself with Different Types of Mortgages
Conventional and Government Insured Loans – Conventional loans make up most of the loan programs available to borrowers. Government loans are insured by the government and have more flexible qualification requirements when it comes to your credit score and down payment.
Fixed and Adjustable Rates – With a fixed rate, your interest rate won’t change over the life of the loan. Adjustable rates usually start with a lower interest rate that will change over time, based on the market.
Jumbo and Conforming Loans – A conforming loan is a mortgage that is under the maximum loan amount set by Fannie Mae and Freddie Mac. A jumbo loan exceeds that limit and is used to purchase more expensive homes.
Balloon Loans – A balloon loan allows you to make low payments for a short time, normally between 5-7 years, but your remaining balance is due at the end of the loan term. Homeowners that choose to go with a balloon loan, do so with the intention of only living in the house for a few years or refinancing toward the end of the loan term. These loans typically are not a good idea for the average homeowner.
How Much Home Can You Afford?
Be prepared for other costs associated with homeownership, like property taxes and private mortgage insurance (PMI). You will end up paying PMI if your down payment is less than 20% of the home value. The larger your down payment is, the smaller your monthly payment will be and you may be able to avoid PMI.
Discuss your down payment options with your lender to make sure you are getting the best loan for your situation. Our partner, Mortgage Center, services most loans in-house and offers loan programs with flexible down payment options. Reach out to one of their mortgage experts by calling 800.353.4449 or get started online by visiting LOC.MortgageCenter.com.
Information as of November 2019.
Equal Housing Lender Mortgage Center NMLS# 282701