If you have a lot of bad credit because of consumer debt like credit cards or personal loans, you’ll want to try to eliminate or reduce this debt before you apply for any real estate financing, since it will affect your ability to qualify for a home mortgage and to make the estimated monthly payment. When you’re buying a home, getting a home loan and the best mortgage rate is the most important step in the whole process; you’ll need to understand the basics about real estate, loans, mortgages, current mortgage rates, and points to get your real estate financing in place.
The first step, even before you start looking for your dream house, is to ask yourself what you can afford to spend each month on a house payment. Find out if there is a mortgage broker or lender mortgage network in your area or check online.
Keep in mind that whether you’re financing or refinancing that most people move or refinance within seven years. And insiders know that the advertised mortgage rates you usually find are not always what you’ll actually get from the lender. Market fluctuations, economic news or any other of a dozen reasons can influence interest rates throughout the day.
One of the advantages of adjustable rate mortgages includes lower costs. They are usually priced lower than fixed-rate mortgages so you can increase your buying power and lower your initial monthly payments. If the interest rates go down, you’ll have lower payments. However an ARM is usually not the best choice.
One of the disadvantages of an adjustable rate mortgage is the possibility of the monthly payments increasing if interest rates go up. Make sure to keep in mind that adjustable rate mortgages are best for homeowners who are not planning to stay with a property for a long time.
Note that any money that you receive from any lending institution will appear on your credit report and your monthly payments will factor into your debt-to-income ratio. Now if you’re working with a local builder in a sub-division or housing development and only making the carpeting, lighting and appliance selections for your brand new home, you’ll probably be able to get a standard mortgage loan. But if you’re hiring contractors, electricians, plumbers, and painters for example, you’ll probably need a construction loan, which provides funds so you can pay the subcontractors as the work goes along.
Most of all you’ll need to determine what you can afford to buy. A mortgage application can be resubmitted more than once. If you’re having a problem getting a home mortgage and the seller still owes money on the home you can check with your lender and see if you can get a wraparound mortgage on it. Although they are not legal in all states, it’ll allow you to pay the monthly payment on the existing mortgage and an additional payment to pay the difference. But make sure that the wraparound mortgage won’t trigger a due-on-sale clause.
The disadvantages of a fixed-rate mortgage include a usually higher cost than other types such as an adjustable-rate mortgage. If you borrow any money for a down payment it must be disclosed to the lender or if any of the money for your down payment was a gift, you’ll need to provide proof. You’ll also need to consider the closing costs and the escrow account for taxes and insurance.
The property taxes may be deductible. Check with your CPA or other tax advisor for the newest tax information. The advantages of a fixed-rate mortgage include consistent principal and interest payments making the loan stable so your rate won’t change. This is a good choice if you think you’ll stay in the house for many years. The interest rate for an adjustable rate mortgage may be adjusted up or down at preset times so the monthly payment will increase or decrease based on this.
When financing real estate it’s also important to know that a low FICO credit score doesn’t mean you won’t qualify for a home loan or home mortgage.
Before you complete any real estate financing read over every real estate contract or home mortgage contract carefully before you sign on the dotted line. Look for anything vague and don’t be afraid to ask questions about anything you don’t understand.
Whatever you do don’t get yourself into a situation where you can’t make the home mortgage payments; think ahead. You have to be careful not to assume that you can cut back on your expenses and stretch yourself into a house payment; you don’t want to be cutting into healthy eating habits by eating fast food for a house that you may not be well enough to live in for a long time. There is much to think about when you first start out searching for the best real estate financing.