Avoid Mortgage Mistakes.
So you are in the market to buy a new house? Congratulations! However, avoid mortgage mistakes to ensure you don’t end up with high rates that become overwhelming, and save you thousands of dollars. Having a mortgage can be a huge asset, or a huge burden and debt to carry. The best way to get a good rate on your home, and avoid mortgage mistakes is to ensure an excellent
So you are in the market to buy a new house? Congratulations! However, avoid mortgage mistakes to ensure you don’t end up with high rates, and save you thousands of dollars. Having a mortgage can be a huge asset, or a huge burden and debt to carry. The best way to get a good rate on your home, and avoid mortgage mistakes is to ensure an excellent credit score. Here we have put together a list below so you have a better journey.
Shop around for the best loan.
Before buying a car or a plane ticket you probably take your time to check for the best prices. Devoting time to find the best bank to work with can ensure you snag the best deals. Make sure to do your research when choosing a loan, and talk to someone who is an expert. You should also use a mortgage loan calculator.
Put something significant down.
Most lenders will require 20% down to enable you access to their best rates and avoid paying the mortgage insurance: this adds an extra cost to your monthly payment. Mortgage insurance protects the lender and not you. Agreeing to pay mortgage insurance leaves you stuck with paying premiums for years to come, and it takes seven years to build enough equity to cancel the mortgage insurance.
Review your credit report.
Before you apply for your mortgage. Most people are not aware of having charge-offs (especially medical collections) on their credit reports. This crushes your FICO scores and can be removed via credit bureau disputes. Credit counseling doesn’t lower your credit score, but most banks won’t lend to people who have used such services in the past.
Don’t commit too much monthly income to house related cost.
Do not make yourself house poor! Conserve your money for other expenses that might come up like car maintenance, college fund for the kids, retirement savings, etc. Do not spend more than 29% of your pretax income on housing i.e. if you earn $150,000 a year you shouldn’t spend more than $3500 a month to insurance premiums, mortgage payment, and association fees.
Obtaining a mortgage without verifiable assets.
Make sure you have a documented 12-month housing history or assets that cover at least two months of the proposed mortgage expenses; including insurance and taxes. It’s important so that lenders know you have enough to cover future payments.
Consider your mortgage types.
Before you borrow, the criteria for shopping should be inclusive of the kind of mortgage you want and how long term you need it. The two types of mortgages are conventional and government-backed loans.
The government-backed loans are ensured either partially or entirely by the government. Check out FHA Loans. They can also be obtained through private lenders, with less rigid small down payments and borrowing requirements. The income requirements are also flexible with less stringent financing needs.
The conventional loans represent about 68% of all mortgages issued. Often offered by commercial banks, private lenders, thrift institutions, mortgage companies and credit unions. They are advocated by federal sponsored agencies based on their size and criteria.
Make sure to keep these things in mind to avoid mortgage mistakes, and enjoy your new home to the maximum.