The experience of purchasing a home can be really great or really costly, depending on how prepared you are when entering the situation. You should come armed with information about home mortgage lending, including how long you’d like to spend buying your home, what mortgage type you’d prefer and how much you can afford to spend on your home loan. Below are some tricky facts that sneak up on potential home buyers.
If it’s not fixed, it might as well be broken.
About 75% of loans taken out to purchase a home are fixed rate mortgages. This means that the rate of interest is fixed. Some lenders offer what is often referred to as an ARM, or adjustable rate mortgage. ARM mortgages may start with an appealing rate, but it’s important to remember that the rate is adjustable and has the capacity to go way higher than you can actually afford. The best way to remember this is that if your mortgage isn’t fixed, it’s broken.
Down Payments are crucial.
Have you ever heard of private mortgage insurance (PMI)? A better name for PMI is “total waste of money because you didn’t plan ahead.” When new home buyers do not pay 20% down, they are often asked to pay for insurance on their loan to protect their lender. This insurance is PMI – and it isn’t cheap. To avoid paying PMI on top of your mortgage, start saving ahead of time for a down payment.
A good credit score will save you thousands of dollars. About 75% of Americans have a credit score below 700. Be a part of the 25%! Apply for a home load when your credit card utilization is low and you have a good payment history.
Home mortgage lending is a huge step and being well informed can save you a lot of time, money and struggle. Just think, 10 hours of learning about home mortgages could save you 10 times the amount that 10 hours of coupon cutting could! Be sure to study up before applying for a home loan.