How to Set Up a Mortgage

Tips for Setting Up a Mortgage

The Rundown

Buying a home just may be the biggest expense in a homeowners life. In order to purchase a home, there are a few strict requirements. You will need a steady job with money saved and budgeted. Researching how to set up a solid budgeting plan may be a smart move if saving money isn’t your best skill. Before you buy a home, you will need to build up credit. Make good choices and stay on top of your taxes in the years before you buy a home. The better credit score you have, the more money you save.

As a prospective home buyer, it is essential for have a steady job. Greater loans come from lenders who look at the last two years of tax returns, making a steady job immensely important. The first thing to do when physically buying a home is putting down a large down payment. The more money saved for a down payment, the less substantial  loan to take out, and the more money saved in the end. A great credit score will be a large help in the home buying process. While a score in the 600’s will get you a decent loan, a score above 720 will save you thousands. Finally, picking the right loan for your current income level and life choices is a massive decision.

home mortgage

Basic Loan and Mortgage Options

Fixed Rate Mortgage Options: Fixed rate mortgages are plans set in place at a fixed interest rate. The loan is equally broken up into payments each month that can be paid over 10, 15, 20 or 30 years. A longer plan, like the 30 year plan, allows the for the smallest monthly payment. However, the interest rate will be higher and you pay more total interest because it is over a longer span of time. A 15 year plan means a lower total interest rate, but higher monthly payments.

Adjustable Rate Mortgages: Adjustable rate mortgages mean more flexibility in the market. They adjust up and down depending on interest rate fluctuations. Adjustable rate mortgages usually begin low with a fixed rate plan. Once the fixed rate period is over, the interest rates can move steadily up or down depending on the market. This is unpredictable, and slightly more risky. Adjustable rate mortgages have the ability to save a lot of money, with an equal ability to cost a ton of money. This plan does come with caps, which helps if the market rates skyrocket. Caps of all different types (monthly, yearly, lifetime) all for some piece of mind in the case of very high interest rates.

Interest Only Jumbo Loan: With this type of loan, the amount of money paid monthly is just interest. This plan allows for paying off just interest for five to ten years. After this fixed rate period of paying off the loan, buyers have to be prepared for an increase per monthly payment to pay off the principle cost of the home, or be prepared to pay a lump sum. This plan is risky, for after the initial fixed rate period, the buyer needs to be able to come up with more money per month.

What Option is Best for You?

When deciding upon a loan that suits all of your needs, it can be very challenging to analyzeHome insurance every detail of every option. It is important to find out as much information as possible about every option in order to make an informed decision. Obtaining all of this information is made
much easier by calling a local bank or credit union. They may charge a small fee, but they will come back with many loan options that suit the needs of your life. A mortgage broker servers almost the same purpose. Brokers can take your application to several banks around the area to get you the best deal.


Requirements to Obtain a Mortgage

Bank StatementBefore applying for a mortgage plan, all lenders need to see paperwork to ensure you have made stable financial decisions in the past so that they don’t lose money. A copy of the last two years of tax returns, bank and investment statements over the previous few months, homeowners insurance, two year residence and employment history, social security numbers, new address and purchase agreement of the new home. Any large purchases made in the previous months as well as any other loans being taken out, for example a new car, will count against you in terms of getting a good mortgage plan.


Hidden Costs

Before closing on a home and signing off on the perfect mortgage plan, homebuyers need to be prepared to pay thousands of extra dollars in closing fees. These assorted fees are often underestimated at first, and when you’re finally ready to close, huge numbers are thrown at the homeowner. These fees are required in order to obtain the mortgage. When paying for a mortgage, homeowners are encouraged to think of it as a monthly payment of the principle cost of the home, the interest, the many takes that come with the home, and the insurance costs. This total value per month is more than just the mortgage alone. You can not be a homeowner without being aware of these other fees. Utility costs often surprise homeowners. It takes a large sum of money to keep a house warm with running water and electricity. Before buying a home, prospective owners should ask the sellers for an estimate of the utility costs to be aware of the fees. Repairs and maintenance fees often sneak up on new homeowners. It is best to have money set aside just for this purpose in case any major repairs are needed in the home.Lender for home mortgage