Getting a mortgage to buy your first home can feel like exploring an entirely new world. In the home buying and mortgage world, there are a lot of terms that you may not have seen before, and a lot of concepts that might be unfamiliar to you. A mortgage lender can be a helpful resource when you’re exploring the possibility of buying a home — you just have to know which questions to ask. If you ever feel confused about any part of the mortgage process, your lender can give you the answers you need. Here are a few important questions to ask.
How do I get the best interest rate?
Mortgage interest rates vary based on location, the type of loan you’re after and your personal credit history. For example, the interest rates in Atlanta might differ significantly from the rates in Washington, D.C. While you can’t change the location of the mortgage, you might be able to adjust the type of loan you apply for or work to improve your credit score before applying. According to the Consumer Financial Protection Bureau, rates can also change from mortgage lender to mortgage lender, so you might want to ask several lenders what their rates are and what you can do to get the best one.
What are the real costs of the mortgage?
Interest rates are just one part of a mortgage’s costs. The overall cost of the mortgage is reflected in the annual percentage rate, which includes the interest rate and any fees and points you’ll have to pay. If you decide to apply for a no-cost home loan, you might see a higher annual rate in exchange for not paying closing costs upfront. Depending on your needs as a buyer and whether you have the cash to spare, paying the higher annual rate and no cash upfront might be the better option.
Will I need private mortgage insurance?
Private mortgage insurance is usually required when you put less than 20 percent of the home’s value down. Your lender should let you know if you’ll be responsible for it and how much you’ll have to pay. Usually, mortgage insurance premiums are a small percentage of the total value of the loan. You pay the insurance premium every month when you make your mortgage payment.
What do you need from me?
Your mortgage lender will most likely want documents that show that you have the resources and the responsibility needed to pay back your loan. Before you head to the lender’s office to apply for a mortgage, make sure you know exactly what you need to bring.
Getting prequalified is the first step toward buying your first home. Before you start the prequalification process, make sure you understand the ins and outs of mortgages, including what you’ll have to pay and what your lender expects from you.
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