Top 7 Common Questions about Getting a Mortgage
Perhaps you have heard horror stories regarding buying a home and getting a mortgage. These stories may frighten you and keep you from getting a mortgage. Answers to seven questions about getting a mortgage will help you seize the opportunity when the time is right.
Do I Need a Pre-approval?
You do not need a pre-approval, but most experts recommend it. The pre-approval will show the seller you want to buy and you can get financing. What is the use of looking at homes valued at $350,000 when you can afford payments on only a $250,000 home? The pre-approval can be useful, especially if other buyers are interested in the house.
How Much Do I Need to Put Towards a Down Payment?
It is possible to get a no down payment mortgage. 20 percent down payment is customary, but you have other options available to you which offer small down payments. If you cannot find a no down payment mortgage, there are inexpensive options such as a 3 ½ percent down payment. You should realize the more you put towards a down payment, the smaller the loan amount will be. In addition, a down payment less than 20 percent will incur private mortgage insurance (PMI).
Should I Choose a Variable or a Fixed-Rate Mortgage?
There is no one-size-fits-all answer to this question. Fixed-rate mortgages have rates that do not vary during the life of the loan. Adjustable-rate mortgages (variable-rate mortgages) have rates that fluctuate daily, monthly, etc. First-time buyers may choose fixed-rate mortgages because of the predictability of the payment amount. If the rate is low when you lock it in, you have that rate regardless of what other interest rates do. Consult a mortgage specialist to decide which kind is best.
What Type of Fees Should I Expect?
First-time buyers may wonder how much it will cost to enter the housing market. Typically, a seller pays the commissions to a real estate agent. The buyer enjoys the expertise of the agent and the seller pays for it. The buyer needs to have the earnest money when making an offer on a home besides the down payment. These fees will apply to the entire price of the house, but it needs to be paid “upfront”.
Do I Need a Great Credit Score?
Depending on your credit score, you may qualify for a lower interest rate. Different loaning entities have different credit score requirements which may qualify you for a lower interest rate. FHA loans usually require a lower threshold of 580 on your credit score. However, conventional loans usually require at least a 620 score. Some organizations require no minimum credit score.
What Type of Mortgage Is Right for Me?
Once again, there is no one answer to this question. There are conventional loans, government-backed loans, jumbo loans, and adjustable versus fixed-rate loans. You need to decide what is best for your situation and which one makes you comfortable.
What Happens at Closing?
A closing agent explains the paperwork which needs to be signed, and a meeting of the minds takes place with you and the seller. Your real estate agent can assist during this process. At this meeting, “the I’s are dotted and the t’s are crossed”. There may be some third-party fees charged at the closing.