Getting a Mortgage is a very important step when buying Real Estate. And now, plain and simple, I explain the whys, hows, wheres, and whens of the big M in the Real Estate business.
Organizing your finances is an important step when buying Real Estate. Having the right perspective, as far as money goes, will help you keep your priorities in check and make the right decision. And, after making that decision, having in mind how much you’ll need to borrow and what kind of mortgage you’d like to get is crucial.
Go Shopping!
Ever wonder where to get a mortgage? Well, there are several possibilities, and shopping for mortgages is a very common thing. You can approach mortgage companies and bank lenders, such as Chase, Bank of America, Wells Fargo, and PrimeLending, directly.
You can also inquire online for companies such as QuickenLoans and Guaranteed Rate. Mortgage brokers can also help, as they will get in their network of lenders to help you. And, of course, there is always that someone you know, who can recommend you to their most trusted mortgage provider.
Pre-Qualification and Pre-Approval
Pre-Qualification: Usually, this is a lender’s initial assessment of your qualification, which will determine how much your loan will be. This qualification will most likely be the result of questions, on a form or through the phone, about income and assets.
Pre-Approval: A more solid guarantee of a loan, based on a more rigorous (and probably paid) assessment and verification of your financial information, such as a credit check. Being pre-approved means more security, as it does define what you can afford, and makes you less vulnerable to rejection when applying for a loan.
Do You Have Bad Credit? Well, it is still possible to get a mortgage, though not easy. Depending on the circumstances, some lenders will adjust. But, keep in mind that interest rates will be higher, because of the greater risk of default. Consider taking some time to improve your credit in order to get a more competitive rate.
Time vs. Money: What Kind of Mortgages Should You Get?
As soon as you know how much money you want to borrow, it is important to decide what kind of mortgage you want and, how much time you want to pay for it.
Fixed-Rate Mortgage: This type of mortgage offers more predictability, as, it has the same interest rate during the loan’s life. The monthly principal and interest payments doesn’t change. This comes in handy if you plan to remain in the property in the future.
Adjustable-Rate Mortgage: Even though the name suggests pretty much how it works, in an adjustable-rate mortgage there is a fixed-rate period (usually 5, 7, or 10 years). The rate then adjusts — with a cap — according to the market. This type of mortgage can be cheaper and more convenient, especially if your plan is to move before the rate adjustment. If you don’t, your monthly payment can rise considerably.
15-Year vs. 30-Year Mortgage: The term of the loan refers to the amount of time you have to pay it back. A longer-term means more time and lower monthly payments. But there is also an advantage of going for a shorter term: low interest rates, which means an overall low cost of the loan.
