Most people dream of owning their own homes. They picture themselves raising families and enjoying life in their comfortable nests. Unfortunately, we all know that houses don’t come cheap.
Mortgages are, in essence, loans. They are unique from other loans as mortgages use houses or land as collateral. You can get a mortgage from a financial institute like a bank, to buy a house or land. And like every loan, there are risks.
Failure to pay the borrowed amount plus interest can cause you to lose your house. Mortgages are a great way for you to get your dream house but it is still a big financial decision. To get the best deal for your house:
Here Are 7 Tips That Will Help When You’re Shopping For A Mortgage
#1. Don’t Settle for the First Lender
Banks are one of the most common institutes where one can get a mortgage. While some banks can indeed get you a good deal, they may not be the best deal for you. It is crucial that you shop around for other lenders.
If you’re already set on getting a mortgage from a bank, at least visit different banks. The more banks you inquire, the more information you’ll have to compare and contrast the rates.
You should also note that banks are not the only financial institutes offering mortgages. There are lending companies such as US Lending that offer mortgages. Also consider these companies when shopping for mortgages to get the best deal for you.
Another option for you to increase your chance for the best deal is to get a mortgage broker. Mortgage brokers are professionals that have contacts to several lenders. Although their service comes with a fee, there is still a chance you get to save money in the end.
#2. Only Deal with Money you Have
There is a golden rule when it comes to financial responsibility: only spend money you have. This gem of a statement is also useful when it comes to borrowing money.
Tweaking it a little, we get: “Borrow only money you can afford.” Mortgages are big financial decisions that take time to pay off. A recommended monthly payment shouldn’t be more than 30% of your monthly income.
#3. Think Twice About That Low Interest Rate
Most think that the best mortgage is one with the lowest interest rate. Unfortunately, these deals are so complex that there is more than one factor to consider.
Aside from the interest rate, a major factor to consider is the financial institution. These places stay competitive against one another so make sure to see how they differ. Some financial institutions have certain mortgage plans that may be fit for you.
Another factor to consider is your monthly earnings. Some lenders feel more comfortable lending larger sums to those with steady earnings. Financial institutes also prefer applicants with regular incomes. This is because self-employed people have irregular incomes and this poses as a risk.
Of course, your credit scores will matter a lot to the lenders. Your credit score is a quick way to see your financial situation. Maintain a good score and lenders will be more comfortable giving you a better deal.
One-way lenders can adjust the monthly payment is by extending the length of the mortgage. In general, this means that the longer the deal, the less you pay every month.
While this sounds good to some, this may not be the best deal for you. First, you have to ask yourself how long you plan on living there. Mortgages can extend upwards of 30 years – that’s a pretty long commitment.
#5. Choose Among the Different Types of Loans
A mortgage is a type of loan in itself but the category can still be further divided.
The most common type is the conventional mortgage. These usually have the best rates. To get this type of mortgage, they might ask you for a down payment and good credit scores.
If applying for the conventional mortgage proves to be hard, there is another way. The FHA mortgage is easier to apply for and it asks for a lower down payment. This may sound better than the conventional mortgage but don’t get too excited yet. FHA mortgages have very unappealing interest rates.
There are also types of mortgages that don’t ask for down payments. But they’re not for everyone. For example, VA loans don’t ask for down payments but they are only available to veterans.
Another type that does not need a down payment is the USDA Rural Housing loan. These types are only given in designated rural areas.
#6. Numbers Aren’t Everything
It is true that getting a mortgage with a low credit score may be harder but it’s not impossible. Once you meet with lenders, you can explain your situation or why your credit score went down. Use your words to convince them that they should trust you with a mortgage. Numbers aren’t everything.
#7. Take a Deep Breath
Getting that loan for your house is important but don’t lose sleep over it. Take a deep breath once in a while.
Plan carefully and run your figures. Slow down and make sure you have all the information you need because once your mind is set, your mortgage can make or break you.
If you are planning to apply for a mortgage, then you’re already on the right path. Learning as much as you can about mortgages can help you get a good deal. Consider these tips and keep learning more. You’ll be in your dream home in no time.