A mortgage is one of, if not THE most important aspect of buying a home. If you can’t get a loan then you can’t buy a home, unless you’ve got the cash of course. But who has a couple hundred thousand laying around ready to spend? Not many. We would like to educate you on your mortgage options and how to best prepare yourself for pre-approval and the entire lending/mortgage process.
There are plenty of different loan types, but when it comes to mortgages, there are 3 main ones you are going to consider applying for. Those 3 are Conventional loans, FHA loans, and VA loans. All have different requirements and contingencies, so you will want to know more about each of them to understand which will better suit your needs.
1. Conventional
2. FHA
3. VA
VA loans are guaranteed by the U.S. Department of Veteran Affairs for loans made by qualified lenders. Before applying, you will want to request eligibility from the VA, and you can apply for loans with low to know down payment, and very good terms. There are special requirements and restrictions on these type of loans in some cases, so talk to your lender or the VA for more information.
Something you will have to consider is whether to pick a fixed-rate or floating-rate mortgage. The benefits of a fixed-rate is that the payments stay the same throughout the entire lifetime of the loan.
Floating-rates on the other hand, offer adjustable interest rates and principle payments. Usually these types of programs are to help first time home buyers that expect to see an increase in income over time. They start out with low introductory rates that will increase later in the loan term.
These can be risky though. Considering the loan rate will be linked to a future market, there is no real way of indicating what the future rate will be, and if you’re unlucky you could get stuck with an extremely high interest rate later in the loan term. These are all things to consider while shopping for a mortgage, but talking to your lender/agent may better help you understand which options are best for YOU!
1. Credit score
2. Create a record of employment
3. Down Payment
A lot of times, lenders will have a required down payment. Depending on the lender and the loan type, the down payments can vary, but for the most part lender will want 20% down. While you can put down less than 20%, most lenders will then require Private Mortgage Insurance which will increase your payments.
Your best bet at getting low rates is to try to have as close to 20% (or more) as you can. The sooner you can pay your loan down less than 80% of your home value, the faster your rates will drop and the less you will pay! Talk to your lender about different down payment options and plans!
4. Lock in Your Rate
When you finally secure your loan and sign the Home Purchase agreement, the VERY FIRST thing you need to do is ask your lender to lock in your rate. Reason being, the closing process can take weeks or months, in which time the market can fluctuate. The last thing you want is for your rate to increase just because the market shot up while you were waiting on the closing. So make sure you have a talk with your lender about maintaining the rate you agree on during signing.
Obtaining a mortgage can be a hard and long process, but with the right people around you, it can be done. Of course, you will want to do your own research and find a loan option that best fits your needs, but for the most part these tips should help you with that process. If you’re looking for a great lender to work with, we recommend Home First Lending for those of you relocating in the Central Florida area. Nick at Home First Lending is amazing and does the best he can to get all of our clients a good deal. Depending on your area or situation, you may want to talk to your bank or maybe even a friend for a loan. If you ever need assistance in buying a home or finding a mortgage loan, Brown Home Group has you covered! Give us a call!
321-348-8720
Sources:
https://www.bankrate.com/mortgages/how-to-get-the-best-mortgage-rate/
https://www.investopedia.com/articles/mortgages-real-estate/08/homebuyer-financing-option.asp
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