One of the most thrilling experiences you can have is purchasing a home. Likewise, it’s probably the priciest option available. You’ll need to get a mortgage loan to buy a house unless you have a lot of cash in your hand. The process of getting a mortgage loan can be daunting, but if you do your research and stay organized, it doesn’t have to be. Below are a few things to look for when getting a mortgage loan.
1. Know Your Budget
The first step to getting a mortgage loan is to know what you can afford. Take a close look at your finances and calculate how much you can realistically put towards a monthly mortgage loan payment. Remember that your monthly payment will likely include more than just the principal and interest on your loan—you’ll also have to factor in taxes, insurance, and potentially private mortgage insurance.
2. Check Your Credit Score
Your credit score is one of the essential factors in determining whether or not you’ll qualify for a loan and what interest rate you’ll receive.
Check your credit score before starting the mortgage loan process to know where you stand. If your score is lower, options are still available—you may have to pay a higher interest rate.
3. Get Pre-Approved for a Loan
Getting pre-approved for a mortgage loan gives you a leg up when it comes time to make an offer on the house. Sellers will take you more seriously if they know that you’ve already been pre-approved for financing, and it also helps you stay within your budget since you’ll know exactly how much money you have to work with.
4. Shop Around for Lenders
There are many different lenders, so it’s vital to shop around and compare rates, fees, and terms before settling on one. It may seem like you have to go with the lender who provides the best rate, but that’s not always the case—sometimes, it pays to choose a lender with slightly higher rates but lower fees (or vice versa). Be sure to ask lots of questions to find the lender that’s a perfect match for you.
5. Consider an Adjustable-Rate Mortgage (ARM)
The ARM system could be a nice choice if you don’t intend on staying in your house for more than 5 or 7 years. Usually during the loan’s initial period, the interest rate is lower for ARMs as compared to the fixed-rate loan schemes. Just be aware that after that initial period ends, your interest rate will adjust annually according to prevailing market rates, which could mean an increase in your monthly payment.
In a nutshell, getting a mortgage loan is a significant component of the home-purchase process. So give some serious thought to your options. After all, being tied down to a high-interest loan for three decades is a significant financial commitment.
Lastly, once the loan is approved, you’ll know you’re in the home stretch. The last thing to do is prepare for the last day of business. As such, you should do a final inspection of the house, secure homeowners plus title insurance and collect your down payment through a cashier’s check.
Have your pen ready to sign the home purchase agreement.