Questions about Home Loans
The home buying process can be confusing. Even if you have already purchased a home before, the home mortgage business is changing. You may have questions about purchasing a home. Below are some of the most frequently asked questions, but feel free to contact your lender if you have any other questions.
Why Should I Purchase a Home Rather than Rent?
Home ownership has many benefits over renting. When you make a mortgage payment, you are building up equity in your home, rather than lining your landlord's pocket. The interest you pay on your mortgage is completely tax deductible. One big advantage of owning a home is psychological. It feels good to own your own home.
How Much Will I Need for a Down Payment?
A few years ago, there were plenty of no down payment loans. Those are getting harder to come by. You should figure on coming up with at least three percent down. Keep in mind that the more you can come up with for a down payment, the more affordable your mortgage will be. If you can come up with a full 20 percent down, you won't have to pay for private mortgage insurance (PMI).
What Kind of Mortgage Terms are Available?
Lenders offer fixed-rate or adjustable rate mortgages (ARMs) in lengths from one to fifty years. The most common term lengths are 30 and 15 year mortgages.
What About My Employment?
Your lender wants to lend money to someone who has the ability to pay back the loan. They will want to see consistent employment and steady paychecks. If you are self-employed or work in a field that pays irregularly, they will want to see proof that you are earning a consistent, if not regular, income.
How Much Other Debt Can I Have?
As you go through the mortgage approval process, your debt-to-income ratio, or the amount of money you pay towards debt every month divided by your income, will be vitally important. If too much of your monthly income is going towards paying off debts, you might not be able to get a home loan. Since different mortgage products and different lenders require different debt-to-income ratios, make sure that you discuss this information with your lender. You may have to pay off some of your debt in order to qualify for the loan that you want.
What are Points?
Points allow you to buy a lower interest rate. One point typically is one percent of the value of the mortgage, and it often allows you to get a .25% lower rate.
Should I Get Pre-Approved for a Mortgage?
It is often helpful to get pre-approved for a mortgage. Pre-approval will let you know how much house you can afford, so you don't end up wasting your time looking at houses that you won't be able to afford. When it comes time to make an offer, you already know what you can ask for.
