You have strived to save a substantial amount for a house down payment. You have scoured the market and found the home that suits your needs.
The only thing that is remaining? Getting a mortgage and closing the deal on the house.
You’ve done well to save and identify the house you want to buy, but that’s only half the job. The other half is choosing the right mortgage, finding the best lender, and making a successful application.
In this article, our focus is on how to find the best home mortgage. Continue reading for expert insight.
Get Familiar with the Different Types of Mortgages
A good number of prospective homeowners usually have a specific idea of the mortgage they want to go for. In many cases, this is the conventional mortgage.
If you already know that you want a conventional mortgage, it’s likely that you aren’t familiar with the different types of mortgages. This is a big mistake. Yes, conventional mortgages are the most common, but it’s also possible that there is a better home loan for you.
As such, start off by developing an understanding of the different types of mortgages offered in the home loan market. In addition to conventional mortgages, there are government-insured mortgages. These are FHA loans, USDA loans, and VA loans.
Government-backed loans are generally designed for low-income earners, people in rural areas, and military workers and veterans.
So, if you’re in the military and you were already thinking of going in for a conventional loan, you might want to check out a VA home loan. There are several requirements you’ll have to meet, though.
Any home loan can either be fixed-rate or variable-rate. The former has a constant interest rate while the latter has a flexible interest rate.
You’ll get plenty of useful information about home loans online, but that alone might not be enough. It’s advisable to reach out to a mortgage broker or advisor for expert help. These professionals will greatly improve your understanding of the mortgage market.
The House You Want to Buy
The house you’re looking to buy has a direct impact on your choice of mortgage, and whether your mortgage application will be approved.
What’s the cost of the house you’re eyeing?
The median cost of a house in the U.S. is about $250,000, so it’s safe to assume that the price of the house is hovering around this amount. However, it’s also possible that you want a more expensive house. $1-million-dollar beach house, anyone?
Mortgages typically have to conform to certain limits, but there are also non-conforming home loans. For example, if you’re buying a 7-figure luxury house, you aren’t going to qualify for a conforming-home loan. You need a jumbo loan, which is non-conforming.
If you live in a rural area and want to buy a house there, an FHA loan might be the best option for you. FHA loans are specifically designed for people who live in rural areas and have a low income. There are set income ranges, so get familiar with FHA loan requirements to see if you qualify.
A mortgage is a loan, and like any loan, the lender wants to know whether you’re capable of repaying it.
So, if your income isn’t right, your application could be rejected. Think of it this way. If you have $500 left after you’ve paid all your living expenses and you want to secure a mortgage that comes with a $500 monthly repayment, no lender is going to approve your application.
As such, assess your income. Can you afford to make mortgage repayments and still have enough left for your other needs?
Besides, how steady is your income? Do you have a government job that’s permanent and pensionable? This is a plus. But if your income isn’t steady, lenders will have a difficult time determining whether you’ll be able to settle your obligations.
How about your credit?
Your credit score has a direct impact on your choice of a home loan. Conventional mortgages require a credit score of at least 620, so if yours is below this, there’s little to zero chance of getting a conventional loan. Lucky for you, FHA loans have lower credit score requirements (540).
When you’re gathering information about the types of home loans, ensure you establish the credit score requirement for each loan. This is an easy way to zero in on a loan that suits your financial capability.
Best Home Mortgages Are Offered by the Best Mortgage Lenders
You’ll settle on the right home loan for you, then you’ll focus on finding the right lender. It’s not wise to start by looking for a lender, followed by the type of mortgage that suits you.
Conventional mortgages are offered by several banks and credit unions across the country. Government-insured loans are offered by specific lenders.
If you’re going for an FHA, USDA, or VA loan, you have to research and find the lenders that have partnered with those agencies.
Don’t settle on the first bank you find. Create a shortlist and call in to ask questions. You want to know about interest rates, loan fees and charges, down payment, required information, and approval timelines. for instance, closes mortgage deals in as little as 30 days.
A good lender coupled with the right mortgage will make your home buying experience pleasurable.
Your Journey to the Best Home Mortgage Starts Here
Buying a home is a big financial investment. You want to ensure that you’re making savvy decisions all the way. Your choice of a mortgage is one of the biggest decisions you’ll have to make.
Having read this guide, you’re now in a good position to choose the best home mortgage.
Keep learning more about home buying and ownership on our blog!