Applying for your home mortgage loan is the utmost important part of buying a home. You should apply for your home mortgage before you even begin looking at houses. Pre-approval of your home mortgage loan accomplishes many things at once: It removes worry over whether or not you’ll be able to afford a house, clearly defines your home-shopping budget, lets the real estate agent and seller know your’e a serious contender, and could give you the upper hand to nudge out competing offers that may not come with pre-approval. But home mortgage loans can be complicated. Here are a few of the basics you should know about home mortgage loans.
First, your credit matters. Before you apply for your home loan, make sure your credit is in excellent condition. Come to the table armed with a healthy down payment. Keep in mind that closing costs, which are usually the buyer’s responsibility, are not covered in your home mortgage loan. Do not change work history prior to applying for a home loan, and do not (absolutely do not!) make any major purchases, buy any big-ticket items, or take out any new credit cards. Even the teeniest tiniest wobble in your financial status could change the outcome of your home loan.
Not all home loans are created equal, and you don’t have to stick with your primary bank. It’s perfectly okay to shop loans, compare rates and terms, and choose the lender who most accurately and affordably meets your needs. What you do want to be cautious of, however, is letting multiple sources check your credit, as each credit check puts a little ding in that shiny credit score of yours.
Fixed rates vs. variable rates: A fixed rate means you may be required to pay a higher deposit up front, and slightly higher monthly payments, but that your loan payment is guaranteed to stay the same throughout the life of the loan. A variable rate means you might be able to slide by with less of a down payment and lower payments to start, but that later down the road as interest rates flex their muscles, you may find your mortgage payment inflating.
The life of the loan may vary, and with it, your payments. Most home mortgage loans are obtained at 30 years, or 15 years, with some variation. With a thirty year mortgage, your payments may be half as much, but last twice as long. With a 15 year mortgage, your payments may be twice as high, but you’ll have it paid off in half the time. Assess your own situation to determine whether you want a loan with a shorter or longer shelf life.
Loan programs are plentiful – but read the fine print carefully. Some loan programs may have balloon payments, early pay-off fees, higher monthly payments, higher interest rates, or other clauses that could make it easy for you to get in the door to home ownership, but harder to leave. Weigh your options carefully. You can take all the time you need to evaluate, but once you make a decision, you’re responsible for that decision for a number of years to follow.
You do not need to accept the full amount for which you’re pre-approved. You have the option to borrow less. It can be mighty tempting when the banks dangle a pretty carrot in front of you. You may see yourself getting a bigger space, or being in a nicer neighborhood, or upgrading to more high end features and fixtures, but be cautious. Being house poor is not a fun experience, and can eat into your emergency fund, or leave you without what you need for maintenance and repairs. Do not over-extend your resources just because you can. Eventually, you’ll pay for your decisions, whether they’re good or bad.
Your monthly house payments will equal more than the amount of your home mortgage loan, so don’t be fooled by your mortgage payment amount. Remember, you’ll also be paying homeowners insurance, property taxes, and other services such as water, sewage, and disposal or recycling services. And, of course, those unexpected emergencies such as maintenance and repairs for the house.
Shop smart. Know ahead of time what your options are and consider them carefully before you sign on the line. Give Adrian Garza-Delgado a call today at 210-595-9492 to learn more about the home buying process and tour available homes for sale in San Antonio.