Purchasing a house is a stressful and a time-consuming endeavor. This makes it important to learn more about the home buying process, as well as the mortgage application. This will help you save money, time, and trouble and make the entire process smooth sailing.
The Thing That Matters More
A pre-approval gives you an edge when shopping for a house. This involves submitting a loan application along with the necessary documentation. A pre-qualification, on the other hand, only gives you an estimate of what you can afford. Mortgage Investors Group and other mortgage lenders in Cookeville note that this is not as strong a pre-approval, but it’s a good first step when getting a loan.
Budgeting for Closing Costs
When thinking about down payment, don’t forget to budget extra money (about 3 to 6% of the purchase price) for closing costs and other fees. These may also include origination fees, title insurance, transfer taxes, and loan points. These may also cover expenses for the services that you or the loan company pays for.
The Truth About Adjustable-Rate Mortgages (ARMs)
Even when interest rates are increasing, ARMs may still be a good option. All you need is to be sure to manage the risk by choosing an initial (fixed-rate) period that suits how long you intend to keep the property, like five years or more. You also have to ensure that you can afford the monthly loan payments if the rate increases or rises to the limit.
Money for Home Inspection
Home inspection fees may vary, but it’s best to expect to pay about $300 to $400. This may seem like an additional expense, but it will help you avoid bad deals and costly repairs. Note that you can also use the inspection report to negotiate prices, especially if the home needs some repairs.
The Need for Private Mortgage Insurance (PMI)
If your down payment is less than 20% of the home’s value, you will need to pay for a PMI. This protects the lender in case you default on the mortgage. This may cost between 0.5% and 1.5% of the mortgage amount annually. This can increase your monthly payment, so it’s best to put down at least 20%.
Be an informed buyer by learning more about the buying process. You should also work with a reliable lender to know more about your options.