There are various factors to consider when it comes to buying a home. Two of the essential aspects of the buying process are figuring out how much you will pay for a house and choosing a lender to supply the needed funds. Understanding the mortgage loan basics prepares you for the road ahead. These basics include:
When and How to Apply for a Mortgage Loan
If you are not able to raise the whole amount required for buying a home, it is wise to take a mortgage loan. When applying for the loan, the lenders want to be sure that you can afford to pay your monthly installments. For this reason, they will seek to thoroughly assess all the information you present to them concerning your loan qualifications. The first step is to examine your financial stability. You should then get pre-approved for a mortgage by your lender. After choosing the right mortgage that you would want to take, submit your application. It is important to be accurate since errors can cause delays. The lender will contact you after verification of your eligibility and let you know more about your down payment, closing costs estimates, and your estimated monthly payment.
Different Types of Mortgage Loans
There are different types of mortgage loans, including two broad categories that depend on interest rates. Let’s look at the fixed rate mortgage and the variable rate mortgage in a bit. Other types of mortgages include government insured and conventional loans. The difference between the two is that the government is not involved in the guaranteeing of the conventional loans.
The Difference Between Variable and Fixed Rate Mortgages
Fixed rate mortgages have an interest rate that remains the same throughout the repayment period of the loan. The advantage of this kind of mortgage is that the borrower can calculate the exact amount of installment paid every month. Variable rate mortgages, on the other hand, are loans with interest rates that are subject to change after an agreed period. The interest keeps changing with each change in the index rate, which means shifts upwards or downwards. These loans are rather risky since the payment might change in significant amounts.
The Importance of Pre-approval When Buying a Home
A pre-approval is crucial to your home search. When you are determined to get a new house, the last thing you want is to cause delays. If you don’t get pre-approval from the lender before you start the search, you could cause severe delays and waste time searching for homes in the wrong price ranges. The pre-approval lets you know exactly what you can afford and shows a seller that you can follow through once you make an offer. It in a bidding war, it could give you the edge.
Choosing a Lender
Do your research before choosing a mortgage lender. Not all terms are the same, and you could find a better deal at a bank that isn’t the one you normally deal with for checking and savings accounts. Ask serious questions that include timelines and details about their lending process. Carry along a list of predetermined questions so you won’t miss important points.
Once you’ve prepared for the home mortgage loan process, you can begin your home search with confidence.
Your real estate agent is the best source of information about the local community and real estate topics. Give the Debra White Real Estate Team a call today at 559-994-9282 or 559-994-9281 to learn more about local areas, discuss selling a house, or tour available homes for sale.