Have you ever wanted to buy a new home near Birmingham, but were afraid of a mortgage? Maybe you’re worried about taxes and insurance escrow? Perhaps you don’t know how to find the right mortgage company and what is a good interest rate? All these questions are going through your mind when looking for a new home mortgage loan, and this article is going to help you with a few tips to get you moving in the right direction.
Save enough money to make a down payment. Lenders may accept as little as 3.5% down but try to make a larger down payment. If you put down 20% of your total mortgage, you usually won’t have to pay private mortgage insurance and your payments will be lower. You will also need cash to pay closing costs, application fees and other expenses.
There are loans available for first time home buyers. These loans usually do not require a lot of money down and often have lower interest rates than standard mortgages. Most first time home buyer loans are guaranteed by the government; thus, there is more paperwork needed than standard mortgage applications.
Before applying for a mortgage, pay down your debts. Lenders use a debt to income ratio to verify that you are able to afford a mortgage. A general rule of thumb is 36% of your gross income should be available to pay all of your monthly expenses, including your mortgage payment.
Know your credit score and keep unsavory mortgage lenders at bay. Some unscrupulous lenders will lie to you about your credit score, claiming it is lower than it actually is. They use this lie to justify charging you a higher interest rate on your mortgage. Knowing your credit score is protection from this fraud.
When considering the cost of your mortgage, also think about property taxes and homeowners insurance costs. Sometimes lenders will factor property taxes and insurance payments into your loan calculations but often they do not. You don’t want to be surprised when the tax office sends a bill and you learn the cost of required insurance.
Know your credit score and verify its accuracy. Identity theft is a common occurrence so go over your credit report carefully. Notify the agency of any inaccuracies immediately. Be particularly careful to verify the information regarding your credit limits. Make all your payments in a timely manner to improve your score.
A good credit score is essential if you want to finance a home. If your score is below 600 you have some work to do before you can hope to purchase a new home. Begin by getting a copy of your credit record and verifying that all the information on it is correct.
Check out several financial institutions before you pick one to be the lender. Look at their reputations on the internet and through friends, and look over the contract to see if anything is amiss. Once you have found out that information, you can then make the best choice for your particular needs.
Make sure you’ve got all of your paperwork in order before visiting your mortgage lender’s office for your appointment. While logic would indicate that all you really need is proof of identification and income, they actually want to see everything pertaining to your finances going back for some time. Each lender is different, so ask in advance and be well prepared.
Some financial institutions allow you to make extra payments during the course of the mortgage to reduce the total amount of interest paid. This can also be set up by the mortgage holder on a biweekly payment plan. Since there is often a charge for this service, just make an extra payment each year to gain the same advantage.
Shop around for the best new home mortgage terms. Lenders individually set term limits on their loans. By shopping around, you can get a lower interest rate or lower down payment requirements. When shopping around, don’t forget about mortgage brokers who have the ability to work with multiple lenders to find you the best rate.
If you have a little bit more money to put down on a home, consider getting a conventional mortgage as opposed to an FHA mortgage. FHA mortgages have lower down payments, but excessive fees that are added to the cost of the mortgage. Save up at least 5 percent in order to be eligible for an FHA loan.
Do not take out a mortgage loan in order to buy the most expensive home on the block. While that may seem like a good idea, it can have a negative impact on your financial future. Home values are calculated based on the value of all the homes around them, which means that later on you may have a hard time selling it for its full value.
Many computers have built in programs that will calculate payments and interest for a loan. Use the program to determine how much total interest your mortgage rate will cost, and also compare the cost for loans with different terms. You may choose a shorter term loan when you realize how much interest you could save.
Be wary of new home mortgage lenders who promise you the moon. Most lenders work on commission. So, it goes without saying that there are dishonest lenders who will promise anything to get a commission. Remember that you can back out of loan application at any time if you do not feel comfortable.
These are some thoughts to get you started, but you are on your way to getting a good mortgage. Utilize what you know, and start confidently searching for the mortgage that best fits your needs. When you have found the one, you will know. It feels good to have a good mortgage company on your side.