For most first-time home buyers, shopping around for that “perfect” mortgage can be a daunting and complicated task. Just as if you were to take your time purchasing a car or new large screen television, purchasing a mortgage loan takes patience and research so that you receive the best possible deal for you and your family. There are various aspects of a mortgage loan that you have to be aware of so you fully understand the type of loan that you’re receiving. In addition, be certain that you know your credit records, income, debts and assets.
One of the most important things that you’ll have to maintain to receive a quality mortgage is your credit score. This includes credit card payments, bills, employment history, debts as well as assets. Your economic history is vital for your economic security, so if your history is unhealthy, then that may affect your chance of getting the loan that you wanted. If you have a poor credit score, then you may be inflicted with higher interest rates.
If you do have a poor credit rating, you may have to wait and save some money before getting a loan. However, if you have a mediocre to poor credit score, but have legitimate reasons of why you have that (ex. Illness, tragedy, and temporary loss in income) then you may not receive as high interest rates. As well, if the information on your credit rating is accurate but still slightly poor, then you may slightly be able to avoid higher interest rates.
There are multiple ways of receiving a mortgage. You get a mortgage loan from a lender, which typically is a bank. Contacting and discussing with multiple lenders will only help your research and your chances a getting that loan you want. However, another method of finding a solid mortgage loan is through the assistance of a mortgage broker. As a separate entity, the broker will contact multiple lenders to try to find you the best deal through your application. However, if you have not signed a contract with the mortgage broker to be your agent then they are not required to give you the best possible deal. Just as you would have contacted multiple lenders, make sure you search around for the most suitable broker, as well as understanding the policies of each one you visit.
Thoroughly understanding all the information lenders and brokers tell you is vital to your success of receiving a worthy mortgage. Be sure you also receive all the required information in order to compare the information of one broker and lender to another. And don’t just settle with knowing only the monthly payment or the interest rates – get all the information there is.
Rates: When you visit each lender and broker, understand their current mortgage interest rates and ask if the rates being quoted are the lowest for that week or day. As well, understand the difference between fixed and adjustable rate mortgages.
Points: These are separate fees that you pay to the lender or broker that will go towards the cost of the interest rates. Typically, if you pay more and obtain more points, it might lower the interest rate for your mortgage. Make sure you see the points in a dollar amount instead of just the number of points you’ll need to receive a lower interest rate.
Down payments and PMI: Some lenders – and even more now if the Qualified Residential Mortgages gets implemented – require the borrower to give a down payment of 20 percent. But some lenders, for borrowers who cannot put down such a hefty down payment, offer conventional loans of as little as five percent. If they were to take such a route, then they may be required purchase private mortgage insurance (PMI) to ensure that nothing too detrimental happens to the lender if the borrower defaults on their payments. Make sure you understand the costs, policies and repercussions of these two options.
The best thing for any new home buyer to do while looking for a mortgage is to take their time and to have multiple options. Don’t rush this process, it can be very severe and detrimental to you if receive a high interest rate loan. Just as if you were to take your time looking for a home, use the same amount effort when looking for a mortgage loan and consult with your Real Estate Agent, they have experience working with lenders and can refer you to a trusted professional.