Buying a home entails a lot of preparation. But how exactly does one prepare for such an expensive decision? One important thing to do is list all the questions you have about purchasing a home. Having these questions answered will not only help you make informed decisions about home buying but also guarantee you’re getting a good lender.
A good and knowledgeable lender will be able to tell you the purpose, benefits, and disadvantages of each type of mortgage. By assessing your current situation, they will also be able to advise which from your set of choices is the better option. This will help you evaluate who you will be able to trust in light of your decision to purchase or refinance a home.
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One of the biggest hurdles to homeownership is the lack of down payment money. Another is the perpetuated misconception that you need at least 20 percent of the home’s purchase price as down payment. Although it remains ideal, it’s not a strict requirement. In fact, most homebuyers today only pay around 10 percent of the home’s purchase price when purchasing a home. There are also special mortgages that only require lesser down payment. For example, the FHA mortgage program only need the borrower to pay 3.5 percent as down payment given he or she meets the minimum credit standards. The USDA and VA loans offer 100 percent financing. In many cases, many home buyers who have the resources to pay the 20 percent conventional down payment opt out of doing so to leverage their cash. A good lender will walk you through the options and the pros and cons of each choice.
The interest rate is one of the most important basis for comparing lenders since a single point difference in rates can mean thousands of accumulated dollars in your mortgage payments. With a rate estimate, you can use an online calculator to approximate how much you will be paying every month. If you’re getting an adjustable-rate mortgage, ask your lender how often the rates are shifted. You may also inquire about the current rate trend and what are the market projections for rates in the near future.
A lender with sufficient and substantial knowledge of local and national real estate and mortgage programs will be able to give you a solid answer to this query, or at least an overview of what might be in stall for you. It’s a good gauge of the lender’s coverage.
It’s not enough to just know your interest rate. Your annual percentage rate includes all the fees embedded in the loan. The lower the APR, the better. Ask if discount points are integrated in your APR.
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The general rule of thumb is: when you pay the conventional 20 percent down payment requirement on a home, you will have to pay for a private mortgage insurance. This is a sort of safety net for lenders in case you default on your mortgage. You can however have it cancelled after you attained the ideal LTV ratio or earned enough equity on your home.
A hard credit check impacts your credit score negatively. To get around this dilemma, credit checks should occur within few intervals between each other.