You’ve just started shopping around for a mortgage. Congratulations! This is an important milestone, and you’re about to make a big decision.
Like most things in life, there are a few things to consider when it comes to mortgages. Luckily, we’re here to help. In this article, we’ll walk you through the basics of mortgages and give you some tips on how to get the best deal.
We’ll also answer some of the most common questions about mortgages. So whether you’re just getting started or you’re ready to apply, this article has everything you need to know.
Figure Out How Much You Can Afford
When you’re looking to buy a new home, one of the most important things to figure out is how much you can afford. Mortgage lenders use two criteria to determine how much you can borrow: your debt-to-income ratio and your credit score.
Your debt-to-income ratio is the percentage of your monthly income that goes towards your monthly debts. This includes your mortgage, car payments, student loans, credit card bills, and any other recurring debts you have.
Your credit score is a measure of your creditworthiness and is based on your credit history. The higher your score, the more likely you are to be approved for a mortgage and the lower your interest rate will be.
Use our handy mortgage calculator to get an idea of how much you can afford.
Sources of Down Payment
There are many sources of down payment. You may be able to tap into your savings, borrow from family or friends, or use a gift from a loved one. You can also explore home equity loans or lines of credit, or find special programs that offer down payment assistance.
Your mortgage lender can offer advice on the best way to come up with your down payment. They may be able to suggest specific programs, or help you explore other sources of funding. Remember, the sooner you start planning and saving for your down payment, the easier it will be to get into your dream home.
Shop Around for the Right Lender
When you’re shopping for a mortgage, it’s important to compare rates and terms from different lenders. Don’t just go with the first one you speak to—take the time to compare offers and find the best deal for you.
Don’t be afraid to ask for a lower interest rate, either. If you have a good credit score and a solid financial history, you may be able to negotiate a lower rate. And if you’re not happy with the interest rate or terms offered by one lender, don’t be afraid to go elsewhere.
Mortgage Options to Consider
When you’re shopping for a mortgage or considering your options, there are a few things you should keep in mind. The two most popular options are fixed-rate mortgages and adjustable-rate mortgages (ARMs).
A fixed-rate mortgage is perfect for those who want to know exactly how much they’ll be paying each month—the interest rate and payment stay the same throughout the entire loan term. ARMs can offer lower interest rates, because they can change with the market, but you’ll want to make sure you understand how that could affect your payments down the line.
For those who might not have a large down payment or don’t have perfect credit, there are some other options to think about. An FHA loan is one of these, which requires as little as 3% down and allows for more wiggle room when it comes to credit scores. There’s also VA loans for military members and their families.
Doing your research on all available mortgage types will help you find the best fit for your financial situation and help you to master your mortgage like a pro.
Pre-Qualify for a Loan to Make Sure You Can Afford the Mortgage
When you’re shopping for a mortgage, it’s important to make sure that you can actually afford the loan. That’s why one of the best tips for a mortgage is to pre-qualify.
Pre-qualifying for a loan helps you determine how much you can borrow and what kind of interest rate you can get. This can help you narrow down the home and loan options that fit within your budget. It also helps give you more bargaining power when it comes time to make an offer on a home.
The process is pretty simple: just talk to a lender about your financial situation, including your income and expenses. The lender will pre-qualify you based on this information and provide an estimate of how much they’re willing to lend. Keep in mind, however, that this pre-qualification isn’t a guarantee of mortgage approval until you actually apply for the loan.
In short, whether you’re a first-time homebuyer or you’re refinancing your mortgage, it’s important to stay well-informed and make the best decision for your unique situation. By following the tips in this guide, you’ll be on your way to securing the mortgage that’s perfect for you.