You will need to get your mortgage application approved before you start house hunting unless you are paying in cash. There are some key factors which you have to put into consideration when applying for the mortgage for you to get the best deal. Some of the main considerations are highlighted below.
Top considerations to make
For you to qualify for a mortgage, you must have a steady source of income that will enable you to make the monthly repayments. You might find a difficult time getting a mortgage if you are self-employed, as your lender will consider this a high risk. You will, therefore, need to have a prime credit score as well as large savings to appear as a low risk to the lender. The amount of income that you earn monthly will also influence the maximum amount that you will be able to borrow.
Nowadays, a majority of the lenders will require you to make a down payment for the loan. The down payment can be a minimum of anything between 5% and 20%, but more will work to your favor. A higher down payment means that you will have a higher amount of equity in the home compared to the mortgage that you take. Loans that are insured by the government will require lower or no down payments.
Loan types and rates
There are different types of mortgage loans that you can choose. Each has its own pros and cons, so you have to make considerations as to which one works best for you. Conventional loans, for example, may require you to pay high amounts of down payments, but you will not have to pay for loan insurance. Irrespective of the loan type that you choose, you will still have to factor in the interest rates. Interest rates will vary based on the lending institution that you choose as well as the current market conditions. A fixed rate mortgage means that the interest rate will remain the same while an adjustable one means that the rates vary.
There are many steps involved in getting a mortgage. When you have settled on a particular lender and mortgage type, you should ask the lender for a preapproval. Preapproval simply means that the lender will approve your mortgage once you get a contract on the house within a given price range, assuming all conditions remain constant.