There is nothing more exciting and terrifying at the same time then buying or investing in real estate. With that being said, you should never go blindly into a sale. Be as prepared as possible before exploring the world of real estate with a mortgage. An educated consumer is a smart consumer.
You have many options for financing real estate, from banks to lending establishments. There are a few things you want to keep in mind whenever financing real estate. The terms of the loan are the most important aspect and you want to be sure you completely understand how payment is setup, the lending agent’s ability to raise rates and when they may do this, hidden fees, and any other terms of the loan. This can often be quite confusing and may be written in such a way to confuse the average consumer so you may want an independent third party who understands financing to look over the terms for you. Make sure you fully understand your payments and the length of the loan.
Typically, your monthly housing expense, including monthly payments for taxes and insurance, should not exceed about 28% of your gross monthly income. If you don’t know what your tax and insurance expense will be, you can estimate that about 15% of your payment will go toward this expense. The remainder can be used for principal and interest repayment. Your proposed monthly housing expense and your total monthly debt service combined cannot exceed about 36% of your gross monthly income. If it does, your application may exceed the lender’s underwriting guidelines and your loan may not be approved.
Mortgage Lenders – Mortgage lenders issue mortgages to borrowers. They then process and sell the mortgages to large investors or into the secondary mortgage market. The Lake Gaston area has many Mortgage lenders to choose from. Many Realtors can refer you to experienced mortgage brokers which will allow you to compare rates, costs and terms of various mortgages.
Fixed Rate conventional loans feature equal monthly payments that are made over the term of the mortgage. The standard time period is 30 years or less. The interest rate remains the same which keeps the principal and interest payments the same over the term. Payments can vary if taxes or insurance escrow payments change.
If you obtain a conventional loan, you may make a down payment of 20% or less. Through the lender, you will be required to buy private mortgage insurance (PMI). This insurance provides protection for the lender in case of default, allowing the lender to approve a larger loan amount.
Don’t worry that every place you shop at will check your credit with the credit rating agencies. They know you are shopping for the best loan and its worth it to get the best deal. Shop mortgage brokers, lenders, private lenders, banks and credit unions for the best deal on rates, fees, points and appraisal costs. All these fees will be built into the closing costs but you will still need to try and keep these costs down if possible. Find a lender you are comfortable with and one who will explain all the aspects of a loan and a mortgage. If for any reason you don’t feel right about it, find another lender.