Getting a Mortgage – Read the Top 10 Tips
1. Mortgages are loans used to buy a house.
The bank agrees to loan you money for a certain number of years. They charge you interest as a fee for borrowing this money. In return, you agree to make monthly payments based on how much money you borrowed, the interest rate, and the number of years for the loan.
2. Make sure you have a stable income.
In addition to savings, you also want to have a stable income so you are confident you can make your mortgage payments each month. A regular income helps you better understand how much you can set aside each month for a house payment and regular contributions to savings.
3. Make sure you have money in savings.
It’s so tempting to buy a home, especially when the monthly mortgage payment is lower than your rent. However, before you jump into homeownership, you need to have some money set aside in your savings account. Some of this money may be used for your down payment. After you buy the house, you will need other money for repairs, home improvements, and unexpected expenses.
4. Getting prequalified by a bank is usually the first step in buying a house.
Getting prequalified simply means that the bank has agreed to lend you a certain amount of money for your mortgage. Your realtor will want to know this amount so they can show you houses in the appropriate price range. For example, if you are prequalified for a $200,000 mortgage, your realtor will show you houses in this price range. This means your first step to homeownership is finding a mortgage lender.
5. You may need to have money for a down payment.
A down payment is money that you have saved to help buy the house. Let’s say you want to buy a $200,000 house. The bank may lend you $190,000 and ask you to take $10,000 out of your savings to pay the rest. This means you need to have some money saved to put towards your new house.
6. Some loans don’t require a down payment.
There are first-time homebuyer programs for people who want to buy their first home but don’t have a down payment. Rural Development Housing Loans require very small down payments or none at all. One of the reasons your mortgage lender asks a lot of questions is to see if you would qualify for one of these loans.
7. Your loan will usually be for 30 years.
Most mortgage loans are for 30 years. You can ask about 10-or 15-year mortgages, but paying off the loan in fewer years means that your monthly payment will be significantly higher. If you like the payments of a 30-year loan but want to pay off your mortgage faster, simply pay extra on the mortgage each month.
8. Know whether the interest rate is fixed or adjustable/variable.
There are two types of interest rates – those that stay the same over the life of the loan (called a fixed interest rate) and those that can change (adjustable-rate mortgages or variable-rate mortgages). If you have a fixed interest rate, your payment will be the same every month for 30 years. If you have an adjustable-rate mortgage (called an ARM in business lingo), your payment can increase or decrease during the 30 years.
9. Shop around for a mortgage, but don’t be surprised if the only thing that varies is the interest rate.
Every bank will tell you three things about your loan – the amount, the interest rate, and the number of years. The interest rate depends on the type of loan you are getting, especially if your mortgage lender can find a special program for your particular situation (like first-time homebuyer programs). The amount the banks are willing to lend you may not differ very much.
10. Your mortgage lender is there to help you through the process.
Your lender is there to give you both good or bad news. It’s great if you easily qualify for a mortgage. If not, the lender will tell you what to do to get ready to get a loan or how to get approved for a bigger loan. Each situation is different, so your lender is there to guide you through the process.
Kaleigh Deering, Vice President and Mortgage Lender at Bangor Savings Bank, NMLS #518288
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