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A couple being handed the key to a new home

Essential Advice on Getting a Mortgage

What to Know About Getting a Mortgage

Buying a house is an exciting time in anyone’s life. However, if you are getting a mortgage, it is riddled with red-tape and paperwork that needs to be submitted by the borrower. There are certain things that are helpful to know and understand when deciding to get a mortgage. You should make a list of the questions you have so you can have your mortgage broker explain everything to you. If you do not ask the questions, you may find yourself with a product you do not want. We’ve outlined some things you should always keep in mind.

Clean up Your Credit Report

You need to make sure you get a copy of your credit report from all three credit bureaus. Take the time to review the reports and examine them for inaccuracies. You should do this well in advance of getting a mortgage. This will give you time to file a dispute about what is wrong and leave time to have the disputes resolved. If you try to get a mortgage with disputed items on your report, you will have a difficult time. You need to make sure the disputes are removed first to help you qualify for a mortgage.

Get a Mortgage Pre-Approval

Getting a mortgage pre-approval is different from being able to qualify for a mortgage. When you get a pre-approval it means a mortgage company has agreed to provide a mortgage loan to you. This is very useful when you choose the house you want to put an offer on. It shows you are serious about your interest.

Make a Down Payment

Even though there are certain loans that tout that you only have to put down a little money, you need to take all the fee and costs into consideration. You may have to put more money down if the settlement costs are higher, or if the bank will only loan you a certain amount of the house price.

Stay Within Your Budget

Make sure you evaluate all of your expenses before purchasing a new home. You do want to get yourself into a situation where you cannot afford your mortgage payments.

Avoid PMI

If you can afford to put down 20 percent of the purchase price, you can avoid having to pay PMI, and secure a conventional mortgage. PMI is a mortgage insurance banks charge if you take out certain loans and cannot put 20 percent down. This can add up to thousands of dollars over the course of your mortgage, so if you can avoid it, it is well worth it.

Mortgage Types

There are several different kinds of mortgages. You could get a conventional loan (which will require 20 percent down), VA loans, and FHA loans. VA and FHA loans typically require a lower down payment (less than 20 percent). You may be asking, what is a reverse mortgage? This kind of mortgage is typically offered to older homeowners who have equity in their homes. It allows them to take out cash against that equity. Choosing a kind of mortgage to apply for can be dictated by the length of the loan, the interest rate, and the terms of the loan.

Understanding the requirements for getting a mortgage can help with the process. Make sure you ask questions such as, what is a reverse mortgage, how much do I have to put down, and what will my interest rate be. It is important to do your research so you can make an educated decision. This will let you get the best product at the best terms according to what you want.