What You Need to Do Before Getting a Mortgage
Owning a home is not just a matter of getting yourself a place to stay and call home, it’s also a big investment that involves large sums of money. Sadly, many people never get to own a home while a huge majority of those who achieved had to endure many years of financial sacrifice in order to save for it. To these group, mortgage arrangements have been the perfect vehicle to turn their dreams of owning a residence into reality.
While most people associate mortgages with a lot of challenges, your journey will be seamless if you do things properly right from the start. This is done to not only ensure that you get what you want but with minimal costs. What should you do before committing to a mortgage loan arrangement? Continue reading to find out.
Know Your Credit Score
Your credit score is an important factor that has to be considered before committing to a mortgage loan arrangement. The major reason for this is that mortgage brokers and other mortgage lenders look at it to determine if they are going to give you a loan or not, and the amount of interest rate they will charge if they honor your loan application.
Knowing your credit score will help you identify areas you can focus on in improving it. For example, you may have forgotten about an existing loan that can serve to give you a bad credit score. Paying the loan will improve your credit score and translate to increased chances of getting your loan approved and at a lower interest rate.
A mortgage advisor can help you work on your credit score. In any case, you can use various free checklists to check your credit score.
Please note that while a bad credit report will not necessarily prevent you from accessing mortgage loans, it might lead to you being charged higher rates.
Your budget is equally important when taking a mortgage loan. Do you have the ability to raise all the required money at the right time? After all, it doesn’t make any sense to invest in a project you won’t be able to sustain. In line with this, it’s important that you understand all the costs associated with a mortgage loan. These include;
- The principal amount to be paid at the start
- The interest rate charged on the loan
- Taxes payable to the government and cost of insuring your property
- Fees paid to homeowners association if applicable
- Maintenance costs and other utility expenses
Getting to know these cost will help you identify if you’re ready to take up home-ownership loan. In case of doubts, you should seek expert mortgage advice form a professional.
The Available Mortgage Loan Options
As an aspiring homeowner, you’ll have a variety of possible options to choose from. The variety is based on a number of factors including the size of the loan being taken, the amount of time allowed to repay the loan, how interest rate is charged, and whether the arrangement is facilitated by a special program.
To better understand this, let’s look at them below.
- Time to Pay
A mortgage loan can either be short-term or long-term. Short term loans involve shorter periods of payment, with most being less than 10 years. While holders of this type of mortgage have to pay huge sums every month or year, the interest rate charged to them are usually lower.
Long-term loans, on the other hand, involve long payment periods, usually between 15 to 30 years. This type involves paying relatively smaller sums as installments but the interest charged on them are usually higher.
- How Interest Rate is Charged
With respect to interest rates, a mortgage can involve either fixed or flexible interest charges. Fixed interest mortgage loans will involve a constant rate of interest for the entire duration of the loan. However, the interest charged can be flexible in some loans. Taking a flexible interest rate loan will expose the mortgage holder to potential risks in the future, with the notable one being a significant increase in interest rate. As such, mortgage broker Southend will come in handy to advice you on what’s best.
- Loan facilitated by Special Programs
There are a number of special programs that serve to give support to aspiring homeowners. These could be government programs or programs facilitated by mortgage lenders, housing firms, federal governments, or other government or privately-owned entities. Such programs make home ownership cheaper and more attainable. It’s best that you consult with a mortgage advisor to see if you qualify for such programs.
Signing a mortgage loan contract is just the first step in a long journey of home ownership. It’ll mean you have to pay an agreed amount periodically and without fail. As such, it’s important to fully understand what you’re getting into. This article has shared some of the important things to know before committing to the loan agreement.