Finding the perfect place to call home is a top priority for many people. This process, while it should be exciting and joyous, can instead be weighty and tension-filled. The location has to be just right. The price, even more important, needs to line up with your capability. Settling on the right loan and hiring the best real estate agent can also be sticking points for potential homeowners. If only understanding home loans could be made simple. Keep reading!
Enlist The Services Of A Mortgage Broker
Making headway on your journey to homeownership can look like many things. You may have found a house you absolutely adore and are now ready to delve into the loan aspect. If you have no clue or very little knowledge about the process of securing a loan, you are one of the millions, so don’t feel ashamed.
The process can become very intricate so if you cannot rely on your smarts, delegate the negotiating to an expert. Feel free to ask KC Mortgage Guy as many questions as you like. As a reputable mortgage lender, he will deliver honest answers. Get clarity on veteran and physician loans and know whether you qualify. Did you know that as a veteran or a military officer in the United States, there’s a high chance you require no downpayment on loan!? And that, on average, these loans carry lower interest rates! How about that as a physician, you can close on a home 3 months before even starting your job!
This is only the tip of the iceberg, but it’s already very exciting thinking of the possibilities that await you.
Breaking Down Key Terms And Further Loan Options
This is a big deal. To qualify for any loan, your credit score must be above a certain amount. Ranging from three hundred to eight hundred and fifty, the higher up on that scale you are, the greater your chance of securing the credit or mortgage. It hints to lender institutions your ability to manage money and, in turn, repay a loan. Work on your credit score now to not have it come back to bite you in the butt later.
The Principal
Simply put, this is the total amount of money you borrow. If the mortgage costs two hundred and ninety thousand dollars, your principal is exactly that amount. A bit of every monthly payment that you make goes toward repaying the amount of the loan. Interest comes in addition to this amount. When your principal drops down to zero, your loan would have been paid off.
Refinancing
Let’s say, for instance, you take a loan to purchase a house. You now live in that house but are unable to meet the monthly mortgage payments. Should you borrow more money for the purpose of paying the mortgage, you would have refinanced. Persons who have secured a fixed-rate loan and are thus bound to pay high-interest rates even when these dip on the market may take a second mortgage to now take advantage of the reduced interest rates.
Fixed-rate loan
Also called a fixed-rate mortgage, this is considered the most standard type of loan. Once your monthly installment and interest rate have been decided, they will remain the same until the loan is paid off. If you plan to live in the home for an extended period of time, fifteen to twenty years or more, then you can calculate exactly how much your payments will total for that extent of time. To qualify for this or any loan, a good credit score is necessary.
Adjustable-Rate Loans
These mortgages appeal to persons who are more risk-takers. While the fixed-rate loan locks you in onset payments monthly, the adjustable allows for variation in payment amounts especially as relates to the interest rates. That means that when the market rates are high, the interest will rise but when they are low, your interest payments are reduced. It really is a roll of the dice since the markets cannot be predicted with certainty.
Federal Housing Association Loans
If you failed to qualify for any of the above-mentioned mortgages, don’t despair. This option may yet work out for you. You may still get the green light for borrowing because the financing obligations for the loan won’t fall on you but instead upon the association. Due to this, the lending institution feels more at ease granting the loan.
Home Equity Loan vs. Home Equity Line Of Credit
Don’t be fooled, and these are by no means the same thing. A home equity loan is a second mortgage that you can leverage based on the difference in how much your home is worth on the market and how much you still have left to pay on the mortgage. In this case, you will be given one lump sum of cash with non-adjustable monthly installments. Once you begin borrowing from that sum, a relevant interest rate will apply and carry through.
With the line of credit, there is no lump sum. You will have access to a certain amount of money which you can freely borrow from. And unlike the home equity loan, interest rates will only apply based on the amount of money you actually use from the credited amount.
Documents Needed To Secure A Home Loan
As soon as you have it clear in your mind what kind of loan you prefer to apply for, ensure you have these documents in hand. You will need your application form filled out, some proof of identity, and income. Based on your financial stability, you may also be required to present your credit history, tax returns, and bank statements. Be sure that you can prove yourself to be a safe borrower, posing minimal risk of loss to the lender.
There are certainly quite a few ins and outs when it comes to buying a home. You can easily get lost in the terminology. So while, yes, you can read this article and do additional research to piece together the steps you need to follow to successfully secure a loan, consider seriously enlisting the help of an expert who can and will more quickly get you to your desired end.
