A mortgage loan is used by purchasers of real property to raise funds to buy real estate or by existing property owners to raise funds for any purpose while putting a lien on the property being mortgaged. Below are some essential mortgage tips.
Improve your creditworthiness – Your credit profile is important to a lender. While you’re preparing to buy a home, be sure you’re responsibly managing your current debt. Always pay your bills on time and chip away at your outstanding balances by paying more than the minimum.
Save for a down payment – if you’re interested in building sizable equity right away, stash a hefty amount of cash to take to the closing table. Additionally, do your due diligence to find out about any local down payment assistance programs.
Seek pre-approval – Before you rush into house-hunting mode, get a mortgage pre-approval. This process is used to help determine how much money you’re qualified to borrow for a home purchase. Once you’re pre-approved, you’ll have a more realistic expectation of which for-sale houses fall within your budget.
Research loan types – A fixed-rate mortgage isn’t right for every home buyer. Neither is an adjustable-rate mortgage. If you plan to stay put in a home to raise a family, you might consider a 30-year loan. Conversely, if you’re moving in 10 years or less, an adjustable-rate mortgage, or ARM, could better suit you.
Consider your lifestyle – When you purchase a home, you’re also investing in the community that surrounds it. More importantly, your home becomes central to every other aspect of your life. As you shop for homes, consider your work commute, nearby schools and any extracurricular activities in which you and your family might participate.
Remember to budget – Your monthly mortgage payment won’t be the only expense you have as a homeowner. There’s also homeowners insurance, property taxes, maintenance costs, etc.
Beef up your savings account – It’s unwise to drain your savings to fund your down payment or closing costs and leave nothing in the account to cover emergencies. A useful rule of thumb is to stockpile 3 to 6 months’ worth of living expenses. This deters you from tapping credit cards or loans and amassing more debt.