What to Know About Home Loans Before Buying a House
July 6, 2018 | Kirk Callender
Buying a home is something most people will do at least once in their life, and many of those buyers will need a mortgage. But before you consider borrowing money to buy your house, there are some things you should know about the process of getting a home loan:
A credit score is king
Many people worry about whether they make enough money to afford a home or whether they have a big enough down payment. But the one factor that is most important in determining whether you can qualify for a loan and what interest rate you can get is your credit score. The higher your credit score, the better your chances are of getting a loan at the lowest rate possible. Getting a low rate is important because it saves you thousands and thousands of dollars over the life of the loan.
Check out programs
Many people go straight for a conventional home loan without investigating whether they might qualify for special programs. There are a number of special loan programs for first-time buyers, and low home loan rates for veterans. According to Low VA Rates, these kinds of loans require no money down and roll closing costs into the loan balance, allowing veterans to purchase a home with virtually no out-of-pocket cost. Additionally, people who live in rural areas or those who buy in an economically disadvantaged area might also qualify for special loan programs.
One of the worst things that can happen is to find the home of your dreams only to find out after the fact that you can’t qualify for a home loan. That’s why it’s a good idea to get pre-approved through a bank or other lender. You will provide some financial information, and the bank will tell you how much of a loan you can qualify for. While a pre-approval is not a guarantee of a loan, it does give you an idea of how much house you can afford.
There are ways to lower your rate
Whatever interest rate you get approved for based on your credit score, there are ways to lower it. You may qualify for discount points, which are upfront payments that lower your interest rate. If you can afford a higher monthly payment, you might be able to get a shorter loan term, which often means a lower rate.
Borrowing money to buy a home is a big decision that will affect your life for many years. That’s why it’s important to do your homework and be prepared so you make the best decision.If you are thinking about buying a home soon, please feel free to contact us with questions about home loans or anything else about the process of buying a home!