What You Need to Know Before Applying for a Mortgage Loan on a New Home

Tips before you apply for a mortgage loan for a new home

Despite the common misconception, mortgage loans are easily available and easy to get as well. You simply need to be prepared to secure a good deal quickly and without much effort. Get all the useful mortgage info and advice that you need to make a killer application and secure the best financing.

Borrowing Options

You need to know where you can get a mortgage loan from first. On one hand, you have the private lenders like Wells Fargo and Capital One. You should be able to differentiate between commercial banks and lending companies and credit unions, which are often able to offer more lenient terms and more affordable interest.

On the other hand, there are the home loan programs backed by the government and the different states. In this range, you will find FHA loans, VA loans and USDA loans, to name some of the most popular options. These mortgages are much easier to qualify for and usually offer more affordable terms and conditions, but you have to check specifically whether this is the case as their costs are currently on the rise as well.

Types of Mortgages

There are two categories of home loans based on risk. The low-risk ones involve monthly payments which include the interest and principal payments. The high-risk ones include the payment of a smaller monthly installment, which may consist of the interest only or of small chunks of the interest and principal. Upon the end of the loan’s term, you have to pay the outstanding balance, which tends to be quite large, in full. Unless you have a precise plan for making such a balloon payment, high-risk mortgages are not recommended for the purpose of saving.

There are two types of home loans based on interest rate. You are most certainly familiar with the basic mortgage info on fixed-interest loans. The interest rate does not change throughout the term of the loan and the same applies to the monthly payment as well. The adjustable rate loans, on the other hand, have an interest rate which can go up and down every month within certain limits. They can save you money if the interest remains low, but they can turn out to be more expensive as well. Besides, the monthly fluctuations in the interest can put you at greater risk of default.

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Loan Type

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Affordability

The most important thing is for a mortgage loan to be affordable. Otherwise, you risk losing your home. In order to calculate precisely how much you can afford to borrow, you should use a tool especially designed for the purpose – a mortgage affordability calculator. When you use this online tool, you need to enter your income and current debt details and the size of the down payment which you plan to make plus the interest and term of the loan that you plan to take out. The calculator will produce the loan amount which the lender will be able to extend to you.

Eligibility

You need to get precise mortgage info on the eligibility criteria set by the lenders that you plan to apply to for a loan. Most commercial banks require credit score of above 680, down payment of at least 5% and debt-to-income ratio lower than 45%. Check the precise requirements in advance to ensure that you will meet them.

Comparison Shopping

Once you ensure that you can meet the eligibility criteria of the average lender, you need to go shopping for mortgage loans. It is essential for you to get and compare quotes from as many lenders as possible. The good news is that you do not have to approach every lender personally. You can use an online service for home loan comparison like Lending Tree or Prime Lending. The important thing is to base your comparison on all major criteria including interest rate, initiation, monthly and penalty fees, monthly payment size, term, total cost and flexibility.

Applying

Compile all the paperwork which you need for making a mortgage application. Fill out the form of the chosen lender carefully. Be prepared to wait for over a week before you hear from the lender. If you want to speed up the deal, you should consider fast online lending services like Quicken Loans.

The key to success is to get as much mortgage info as possible, to compare the various lenders and products and to pay attention to the details.

Christian

Christian

Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info
Christian

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