Things to Know When Getting a Mortgage

Seniors be Prudent! Mortgage Loans Need Due Diligence

So, you have decided to own a home. Now, you need the funds to purchase it. Believe it or not, finding the best home loan is a job that can be extremely challenging. It is, therefore, very important that you do your homework before walking into a bank and applying for a loan. Whether you are in your prime years or whether you are a senior, the need for choosing the right mortgage required due diligence. Who knows, it could have been years since your last mortgage and things could have changed. Below are a few things you can consider if you are interested in getting a mortgage.

What is your Budget?

This is the main problem. How much can you afford? Take a close look at your debt-to-income ratio and consider whether you can afford the house you have been coveting. Let’s be realistic, sometimes, what we want and what we can afford are two very different things. Consider your annual income, your down payment, and your monthly debts to see just how much you can afford to put into a house. Most financial experts recommend less than a 28% debt-to-income ratio. If you are a senior on a fixed income as a pension, then you need to consider your other assets, other commitments, and health expenses, etc. before deciding on the home purchase budget.

Which Loan?

When you speak to your banker he/she will provide you information with different types of loans that will spin your head. All these loans are offered so that you get the chance to purchase your dream home. Keep in mind however that you have to select the loan that best suits YOU. You may consider the same type of loan you applied for in order to buy a home previously. However, things change and this type of loan may not be the best bet now. Make sure you understand the length of the loan, terms, and conditions, and most importantly, the interest rate. What interest rate will you consider? Will it be the fixed-rate mortgage or the adjustable-rate mortgage? Many people will offer advice about the benefits and drawbacks of both these mortgage interest types. Give careful consideration to all the advice you receive before making your mind up.

Brokers or Lenders?

Mortgage lenders are banks and other institutions that enable you to take out a loan. Mortgage brokers are the guys in the middle who work with you and the bank to help with your loan. This too has its ups and downs, and you should give careful consideration to them. Although you may wish to work with a mortgage lender as it is more reliable, mortgage brokers sometimes, offer the best rates.

Buying the home of your dreams is a big move and you cannot afford to make any mistakes. However, there is less chance for error if you do your homework and understand everything about your mortgage procedure before visiting your lender. Read through the Good Faith Estimate or GFE. This is a document given when you have been approved for a home loan. The GFE gives an estimate of the settlement charges and loan terms when approved for a loan. This is a requirement set by the Real Estate Settlement Procedure Act (RESPA) that every United States bank or lending institute has to abide by. Information about the GFE forms, how to fill them, and what to know, can be downloaded via the internet.

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