To buy any house, condo or mobile home, many real estate agents and sellers only accept offers from buyers who are pre-qualified for a home loan or have cash in hand. It is a very rare occasion that someone has adequate money to purchase a new home without some kind of financing required.
Your Credit History Is Relevant
Pre-qualification for any mortgage is heavily based on your current credit score and your debt to income ratios. Financial institutions want confirmation that you have paid bills when due, have the resources available to manage the mortgage for which you are requesting and that you are not presently behind on any of your monthly payment loans.
While a poor credit score is not necessarily %the kiss of death to a% mortgage pre-qualification, having a low credit score typically means a higher interest rate. Typically, the poorer your credit is, the more you will pay overall when borrowing money from a financial institution.
Your best plan of action is to make certain you pay on time. Additionally, never get in over your head with debt. Download a copy of your credit report before you fill out an application for any loans and verify that the information is correct. If it displays late payments that were not, in reality, late, find canceled checks and bank statements as proof and then write or fax the credit bureaus and ask for that information to be adjusted. The same is relevant to accounts that are not ones you applied for or unauthorized charges.
Shop Online for Good Rates
Bank interest rates will fluctuate. To start, there are adjustable and fixed rates. When it comes to adjustable rates, your starting interest rate is low, but it may go up or fall depending on what the prime rate does and the indexes that it the loan is connected to. While adjustable rates can be attractive to the bargain hunter, your mortgage payment usually rises throughout the life of the loan making it tough to get a hold of your mortgage payment.
Fixed rates remain steady throughout the life of your loan, so that you know exactly how much you will be paying for the next fifteen to thirty years. With the arrival of the Internet, it is much easier to find rates that fit your budget. Many online sites will even put rates side by side for you so that you have a bargaining chip to get banks to compete for your business.
All interest rates are linked to points. Points are a percentage of your loan amount that you pay to find a lower interest rate. You will find points ranging from zero to three. Most people go for zero-point loans because they do not have the funds for the extra money required. Talk to your lender about the alternatives. Most are more than prepared to work out a mortgage loan that fits your needs.
Do Not Purchase More than You Can Manage Financially
Though not as common, in the past lenders and realtors were more than willing to help you buy a home out of your budget by employing alternate mortgage plans like interest-only loans. Usually, these loans are affordable, but do not permit you to build up any equity in your home.
On the other hand, consider how much money you can comfortably afford to pay every month and request no more than that amount. You can always bargain sellers down in price and you will have the home you like at a monthly payment you can handily afford.
