Americans have more mortgage debt than ever. It totals $9.4 trillion in the second quarter of 2019. Before you decide to buy a home, you should know what you’re getting yourself into.
Learn the mortgage facts that can affect your loan and cause you to pay more than you need to. Arm yourself with knowledge by learning the facts below and be ready for your home purchase.
You Don’t Have to Put 20% down
You could put down as little as 0% when buying a home. If you don’t have significant savings built up to buy your home, look for programs that don’t require 20% down.
A piggyback mortgage will only require you to put down 10%. Then there are programs through Fannie Mae and Freddie Mac that only require 3% down.
If you qualify for a VA home loan or a rural housing mortgage, then you could obtain a 0% down payment.
You Don’t Need Perfect Credit
Having excellent credit can help you score a better rate. But you don’t need perfect credit to get approved.
There are several programs designed for first time home buyers. These programs understand that some home buyers are younger, have lower-incomes, and lower credit scores.
Another option is to save up a larger down payment. This will help compensate for a lower credit score so you can still obtain favorable mortgage terms.
You Don’t Have to Pay Closing Costs
The closing costs are the fees that need to be paid at the transfer of the property. These include the escrow, insurance, lender, home appraisal, and home inspection fees.
To avoid paying for all of this, ask the seller to pay them. Another option is to ask the lender to pay them for you. Most lenders will agree but will increase your rate as a result.
This type of loan is known as a zero-closing cost mortgage. The lender will add a .25% increase to your rate.
You Can Test out a Mortgage Company
You can contact a mortgage company, such as Fairway Mortgage, and ask for pre-approval. You’ll learn how much you can qualify for and what it will cost you.
Once you know this information, you can ask what you need to do to qualify for a larger loan or lower monthly payments. Doing this before you start your home search will help you stick to your budget when looking at homes.
May Not Need Two Years of Employment
The automatic response to employment history is two years. But this answer isn’t totally correct. It depends on your specific history and your prospects.
You could have a history as an unpaid intern where you’ve recently received an offer for a full-time salaried position. While you technically don’t have a two-year work history, you do show stability and future ability to pay.
Learn the Mortgage Tricks and Save
When you learn the mortgage ins and outs, you are better prepared to look for a lender offering that is most favorable to you. So take a look at your current situation and determine the best approach for your mortgage application.
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