The Basics of a Home Mortgage Loan

Most people are unable to pay cash to buy a house. This is where a home mortgage loan comes in handy. A home mortgage loan is secured from a lender, typically a bank, for the purchase of a home or property. For most people, this is a normal part of the home buying process. However, before you begin searching for your dream home, here are some things you need to know about mortgages.

Mortgage Loans 2Credit matters. Your credit score plays a crucial role in your ability to secure a home mortgage loan. A lender is going to look at your score and the information on your report with a critical eye. Spend some time reviewing your credit reports. It’s a good idea to get a copy of your report from the top three reporting agencies. If you have wonderful credit already, you are a step ahead of the game. If you have negative items on your credit report, you’ll want to take care of those as quickly as possible. It is possible, in some cases, to have a co-signer for your mortgage loan. This co-signer must assume responsibility for the loan in the event that you can’t meet the terms.

When you apply for a home mortgage loan, the lender will look at your income to debt ratio to make sure you can afford to repay the loan at your current income with the level of debt you have at the time of the loan. For this reason, you should avoid making large purchase around the time you are considering a new home. Along the same lines, avoid switching jobs if at all possible. A favorable work history speaks volumes and lets the lender know you are reliable.

Getting a home mortgage loan doesn’t mean you won’t need to pay money out of your own pocket. In fact, you’re most likely going to need a down payment of around twenty percent of the price of the house. It’s a good idea to have a substantial savings before you move forward with your home search.

There are some programs that help first time buyers, veterans, and those with limited income. These loans may have significantly higher interest rates or require a balloon payment at the end of the loan. Your real estate agent will have more information on the types of programs available in your area.

You may be asked to make a good-faith deposit, even if you have a home mortgage loan pre-approval. Also consider that you could be required to pay closing costs. These costs usually include things like attorney fees, clerk fees, inspections, and appraisals. These closing costs are not included in the home mortgage loan and will be paid out of pocket.

Mortgage Loan 1When applying for a home mortgage loan, you’ll want the details on whether it’s a fixed-rate mortgage or a variable rate mortgage. When you get a fixed rate mortgage, your payments remain the same for the life of the loan. This is great for people who prefer to know exactly how much their payments will be each month. These loans may have higher interest rates and higher monthly payments. A variable rate loan can fluctuate over time, depending on the market. It’s possible you could start out with a low interest rate that changes over time to a larger one. If this happens, your monthly payment could change. Look at all the options and choose what is best for you.

You’ll also want to consider the life of the mortgage loan. Home mortgages can last anywhere from ten to thirty years. Choosing a shorter loan time will increase your monthly payment, but you’ll be rewarded with paying off the loan faster. A loan with a longer life will have smaller monthly payments, but you are responsible for more years. Read the terms carefully when choosing.

Shop around and find the best home mortgage loan for your needs. If you have a long time account at a reputable bank, it’s usually best to start your research there. Don’t feel obligated to stick with your bank. Rates and terms vary from one lender to another.

Call The Jumper Team today at 910-644-0303 to discuss selling your house or to tour available homes for sale in the Fayetteville area.