Before getting a mortgage loan, there are certain facts you should know. Here are three things you need to know before getting a mortgage loan.
When getting a mortgage loan, it will make it much easier to qualify in today's market if you make a down payment of 10 to 20 percent. Ideally, you should make a down payment of 20% to improve your attractiveness as an applicant and to avoid costly Private Mortgage Insurance (PMI). PMI is required when you make a down payment of less than 20%. If you can't come up with this amount of cash when getting a mortgage loan, don't worry. There are still lenders that are willing to work with you. However, you will need to have good credit and be able to document your assets and income. Generally, the lower your down payment, the higher your interest rate will be as well when getting a mortgage loan. Some lenders are willing to offer mortgage loans of 100% in some cases if the applicant has an exceptionally high credit score.
Many people see market interest rates dipping to historic lows, and they think getting a mortgage loan with a low interest rate depends on this factor alone. In reality, your down payment will affect your interest rate, as will your credit score. When getting a mortgage loan, you want to make the highest down payment you are financially capable of because it will lower your interest rates considerably. Similarly, you will want to deal with credit issues before getting a mortgage loan so you don't get stuck with sky-high interest rates. As mentioned before, your monthly payment will also be influenced by PMI, which is required if your down payment is too small.
You've heard the real estate cliché that it is all about "location, location, location." This is actually sound advice when getting a mortgage loan. Consider the neighborhood of your prospective new home carefully, as the values of the homes surrounding yours will directly impact the value of your home. You want to avoid areas where home values are plummeting or where homes have been on the market for months. Further, lenders will assess the value of your prospective home when you are getting a mortgage loan. If home sales in the neighborhood have been poor recently, the lender may hesitate to extend credit. Ideally, you should find an area where home values are on the rise. See how a mortgage loan works on the following page.
