Buying the perfect house can be an exciting time in your life. For many younger buyers, it’s a sign that you’re moving into adulthood. For others, it is the reward of knowing that all your hard work has paid off and you can finally live in your dream home. But finding the right house may be the easiest part of your task. Here are some tips on finding the right mortgage that will help you make the best of your home purchase.
Figure Out How Much You Can Spend
One of the first steps you’ll want to take is finding out exactly how much money you can afford to spend. Having this information will help you narrow your search down to properties that fall within your budget. While realtors and mortgage lenders can help you figure this information out, it’s always a good idea to run the numbers yourself. Check your credit score and analyze your budget. See how much money you can spend on a monthly mortgage payment and still meet your other financial obligations. The Home Affordability Calculator will let you plug in different sets of information so you can get a good estimate of how much you can spend on your purchase.
Get Your Paperwork Together
Applying for a mortgage requires a lot of paperwork. Get a head start by gathering the most common documentation a mortgage lender will be asking for. These documents include tax forms, pay stubs, identification, and Social Security number, among others. The Consumer Finance Protection Bureau publishes a complete list of documentation you may need to apply for a mortgage. Keep in mind that a mortgage lender may ask for additional paperwork, but you’ll have a great start by getting the basic ones compiled and ready to go.
Learn About the Different Mortgages Types
Believe it or not, there are at least three different types of mortgages on the market. You want to learn about all three so you can decide which is the best option for you. Conventional loans, also known as conforming loans, are the more common type of mortgage loan on the market, and more than likely the type of mortgage you’ll be applying for. However, if you have a low credit score (below the minimum 620 credit score necessary for conventional loans), there are government-backed loans, such as FHA, USDA, and VA loans, that not only have lower credit score requirements but also have lower down payment requirements. Finally, there are Jumbo loans for luxury properties with values close to $1,000,000 or more.
It Pays to Shop Around
Once you’ve learned about the different types of mortgages and decided which one is the best for you, it’s time to shop around. Remember, you want to get the best terms you can when applying for a mortgage so you’ll need to check out different options. Get information on rates and terms from traditional banks but don’t forget about looking at online mortgage lenders as well. You can also check with local credit unions in your area, since these may be able to offer more competitive interest rates and more favorable terms. You can get a good head start by checking out some of the best mortgage lenders as listed by Money.com.
Finding the right mortgage is just as important as finding the right home. By doing a little homework, preparing, and shopping around, you’ll be able to find the rates and terms that best fit your budget and your needs so you can enjoy your perfect home.
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