Frequently Asked Questions about Home Loans
There are a lot of different questions that people tend to have about home loans, and it is imperative that you get the answers you need. By taking the time to get this information, you will be able to increase your chances of getting a great deal on your mortgage. A home loan is very serious business, which is all the more reason to get this information before proceeding. You don’t want to make any decisions whatsoever regarding one of these loans until you have all of the facts.
Is good credit required for getting a home loan?
Your credit will play an important role in whether or not you get approved for a home loan, but it’s still possible to get one even if you have poor credit. It’s important to keep in mind that the lower your credit score is, the higher the interest rate on your loan is going to be. There is always a possibility that you will get denied for a home loan if your credit bad enough, though some lenders have higher standards than others when it comes to this criteria.
How much of a down payment do I need to make?
It is always a good idea to put down about 20% of the total purchase price of your home so that you can avoid paying more on interest than you really need to. While you might be tempted to put down as little as possible on your loan, you will ultimately end up spending more in the long run due to the higher interest rate.
What are closing costs and how much can I expect to pay?
You will find that “closing costs” are just all of the charges that you will have to pay before your loan is completed. This can include origination fees, prepaid escrows, title insurance and more. Closing costs can vary quite a bit, but you can probably expect to pay anywhere from two to three percent of the home’s price in closing costs.
Is a fixed-rate or adjustable-rate mortgage better?
It is important that you take the time to learn about the two different types of mortgages that are available before making a decision on one. A fixed-rate mortgage is one where the interest rate stays the same throughout the entire loan period. With an adjustable-rate mortgage, the interest rate is subject to change. Most homeowners will benefit from a fixed-rate mortgage, though it will ultimately depend on your overall situation. It is highly recommended that you take the time to do your research before deciding.
Should I “lock” my interest rate?
“Locking” one’s interest rate essentially means that you will be guaranteed the current interest rate for a pre-determined period of time, usually 30 to 60 days. If interest rates start to go up, it is typically a good idea to lock in your rate. This will ultimately save you from paying more money than you have to over the years on your loan.
What type of mortgage is right for me?
There are a number of different mortgage options that you will have, and it is important to look into each one closely while considering your specific needs. A conventional mortgage is harder to qualify for in terms of credit, but an FHA loan can cost a lot more. If you happen to be a veteran, a VA loan could be the best option for you. If you plan on purchasing a home in a rural area, a USDA mortgage could provide you with a no-money-down option.
Ask your Lender
Don’t be afraid to ask your lender if you have any mortgage-related questions. Those who do not get answers to their questions often regret it later on, so you will need to make a point of doing this if you need to. Also, make sure that you spend an adequate amount of time looking for the right lender to borrow from. There are many different places that you can go to for a home loan, but you don’t want to choose just any of them. As long as you make a point of doing this research, you should get exactly what you need.