If you’re thinking of buying a house, this guide is what you need. We have looked at everything you need to know about before getting a mortgage. Some of them include looking into alternative lenders, improving your credit score, and different ways to make your down payment.
Credit Score
If you have bad credit, banks will view you as a risk, and not lend to you. Also, a bad credit score can also mean high interest rates.
I’d advise you to try and increase your credit before applying for a mortgage. Now, this is pretty easy to do – you simply pay back any money that you owe, and any bills that you are late on.
Contact your local credit bureau and ask for a copy of your credit sheet. You won’t have to pay for it. Once in your hand, decide what action you’re going to take.
Make Your Downpayment
Here’s some mortgage downpayment 101 – all lenders require you to make a downpayment on the house. Most of the time, this will be 20% of the asking price. It’s up to you to decide how you will be making this downpayment/ security deposit. You could go in for a personal loan if you want. However, a smarter choice would be to tap into your savings. You wouldn’t have to deal with two debts this way.
Look at Alternative Lenders
Instead of going to a bank, you could look into alternative lenders, like finance companies. They tend to be more lenient. This might be what you want to hear if you don’t have all the documents that your bank requires, or the best credit score.
Also, some alternative lenders let you choose longer payment plans. Just be mindful of the one you choose to work with – you might get stuck with higher interest rates.
Mortgage Offers
Depending on where you live, there may be special national programs to help first time homeowners. You might end up paying lower rates if you enroll in one. Although you might qualify for some of these programs, there’s a chance that you might not quality for a couple. It’s all about how much research you do.
Payment Time
Choose your payment plan wisely. It might be tempting to go for as long of a plan as possible, but this is risky. You could end lose your job along the line and end up not being able to pay your mortgage. In my opinion, going for a 10-year plan would be the best choice.
While on the topic, be mindful of how much you borrow too. Don’t be tempted to borrow a very large sum just because you can.
Final Thoughts
There are several points to keep in mind when buying a house and getting a mortgage. From these points, the most important would be your credit score. Make sure that it’s low so that you don’t get stuck with high interest rates. Also, investigate alternative lenders instead of just looking into conventional lenders, like banks or reverse mortgage companies.
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