Deciding to buy a new home can be a really exciting time. However, it can also be a little overwhelming with all that you will have to do. From house shopping to packing and moving, there will be several things that you have to accomplish as part of your new chapter in your new home. Aside from selecting the perfect home, however, one of the more important things that you will have to do is secure an affordable mortgage. A home mortgage can be a 30-year commitment, so you’ll want to ensure that you get the best loan product for your needs.
Getting prequalified for a home loan is an important first step because it will help you understand what you can afford and give you a path forward. For most people, shopping for a new home is the fun part, but getting a mortgage can be stressful. Whether you have a good understanding of home mortgages or know very little about the process, it will be a good idea to do some research and brush up on current products and home loan trends. Using a resource like LendingLoco.com could prove to be very helpful. Aside from this, there are some things to consider when looking for a mortgage. Let’s take a look at some things to think about before pulling the trigger on a home loan.
Consider your credit score.
While it might not seem fair, the one factor that could derail the entire home buying process is your credit score. Even if you have a good job with a reliable income and meet the other requirements of home loan lenders, a poor credit score could disqualify you. Your credit score is a measure of how well you budget and spend money and your commitment to meeting financial responsibilities. A good credit score is a signal to mortgage lenders that you can manage your financial debts. The higher your credit score, the lower your interest rate and your monthly payment will be.
While there are several loan programs and different score requirements, you generally need a score of at least 620 for many conventional loan products. Before applying for a mortgage, it is best to keep track of your credit score and endeavor to maintain a good rating. While several factors impact your credit score, paying your bills on time and keeping your credit card balances low will go a long way toward securing a good rating.
Choose the best loan product.
Depending on your lender and selected loan product, mortgages have either a fixed or adjustable rate. With a fixed rate, the interest rate stays the same throughout the life on the loan. This means that your monthly payment will remain consistent. With an adjustable-rate loan, however, your interest rate and payment will change over time. Most home loans have 15-year or 30-year terms, although there are 10-year, 20-year, 25-year, and even 40-year terms available.
In general, you will select between three different types of home mortgages. Conventional loans are typically best for homebuyers with a good credit rating and a decent down payment. These types of home loans are the most common, and they’re available through a majority of banks and independent mortgage lenders. Government-issued loans through the FHA, VA, or USDA are good options for borrowers who don’t qualify for conventional loans or meet certain criteria. These loans are more forgiving in terms of credit score and down payment but come with specific terms. Additionally, jumbo loans are typically for more expensive properties valued at over $650,000 or more.
The old saying that you shouldn’t put the cart before the horse is particularly true when purchasing a home. The process takes time and requires several steps and considerations. It is important that you investigate all mortgage options and take your time to consider your credit and loan products.