Different Types of Mortgages and Ways to Get One
In our life, spending behind a new house is probably the biggest investment we make; so, it takes financing from different sources. In a mortgage, the property is bound as the security to the loan taken. Mortgage is the securest form of financing option available to purchase a home, and the interest rate is lower than other unreliable sources of financing, like: credit card.
An ideal mortgage for you would be the one that suits your personal situation and offers the lowest rate of interest. When seeking financing follow these steps to find out the most reliable source:
- Organize all your financial matters.
- Consult with a mortgage broker to handle credit rating.
- Set a strategy according to your budget.
A depressing scenario might occur when you compare your income to your expenses. But, more frustrating than that is the situation when you can’t make mortgage payments timely. To determine what type of mortgage you are eligible for, your lender will only review the debt payments you have to bear. So, the ultimate task of setting a practical budget on a monthly basis is up to you.
Only after you cut down the expenses from your monthly income, the remnant will be what you can pay on mortgage. While preparing an assessment you should consider costs like emergency repairs, buffer for taxes, and any other cost that may appear.
Before determining the cost of mortgage, you first need to understand how much the down payment will cost you. A down payment is the value that you pay initially to make the purchase of a property. The mortgage will finance the balance of the purchase.
Determine the Size of Mortgage You Can Afford
So, what’s the amount that seem financially affordable to you? Lenders don’t shy away from giving you large mortgage if they see you can afford that; but it’s up to you to decide on which would be the ideal amount without burdening yourself with unnecessary monetary compensation.
Will the mortgage fit into your budget without having you to change your lifestyle? Will you be happy being pocket-poor and house-rich?
Getting Ahead with a Pre-Approved Mortgage
Preapproved mortgages are simple, quick, and without any cost. It will save you valuable time and sellers will take your offer more seriously. But, pre-approval doesn’t indicate you have been all set for a mortgage. Your lender still has the last say in approving the mortgage.
As the financial sector is volatile than any time before, uncertainties appear from nowhere. So, communicate with a potential lender on a regular basis and get to know all the latest developments in the financial world.
Know the Lingo
Based on the risk borne by the lender and the amount of down payment, mortgage is of generally two types.
Fixed Rate Mortgage: A fixed interest rate will be applicable during entire term of the loan. Perhaps the biggest advantage of this is, you don’t have to think about the amount of payment that fluctuates with a change in the rate of interest.
Variable Rate Mortgage: This type of mortgage comes with a fixed payment, but the rate of interest fluctuates. When the interest rate is low, you have to make more on principal; whilst a surge in interest rate means: you pay more on interest.
At this point, the best advice we can give you is, always consult with your realtor to have an idea of which one would be the best for you. And, then, decide on whether to accept or reject a mortgage seller’s offer.