5 things to know about your mortgage
Here is what you need to know about your mortgage before you close the deal.
The moment you have been waiting for is here. You searched for listings, visited properties and finally found the one. Your dream home. And now all you need is a mortgage.
Your budget and monthly payments will depend on that mortgage. It is part of being a homeowner. So, you need to know it like the palm of your hand. Here are five things to know about it before you close the deal.
1. The estimate of your loan
The first things you should know is how much is the loan and of course, how much the monthly payments will be. A lender is required to give you a loan estimate which includes the interest rate and fees. Include these in your budget and remember to include upfront and continue costs.
2. Interest rate and annual percentage rate
Your lender will also give you an annual percentage rate or APR. APR is the yearly interest applied to a loan. When considering your finances, it is essential to look at both the interest rate and APR. Interest rates are paid monthly, while the other fees included in the APR are paid at closing.
3. If you can lock your interest rate
Unlike a fixed mortgage rate, a variable rate relies on interest rate changes. Before you know it, hiking rates can be around the corner. One way to protect yourself is to ask your lender to lock your interest rate. For a time, they will be set in stone. It might cost you, but a lower rate is worth every penny.
4. What you need to qualify for this loan
Loans have requirements that you should know beforehand. And lenders need evidence that you have sufficient funds for the mortgage of your choosing. Proof of income and assets, bank statements, tax returns and credit reports are documents you should be ready to hand in.
If you provide less than 20% of down payment, one requirement for your loan might be mortgage insurance. It protects the lender in case you can’t pay up when mortgage payments are up.
5. When your mortgage will be ready
Having your mortgage set is necessary to be handed the keys to your new home. You should be 100% sure that it will be ready before closing day. Time is essential here. Ask your lender for a guarantee because if it doesn’t come through on time, you can be on the hook. The moving schedule will have change, the locked interest can expire, and you might have more than one problem with the seller.
Our recommendation? Ask your lender how long it will take them to approve of your mortgage application and get pre-approved for your mortgage as soon as you can.
After searching for a house, a mortgage is the next step in your journey to becoming a homeowner. And good homeowners know their mortgage inside and out.