8 Tips on Seeking Out Housing Loans

By admin / August 9, 2019

If you’re a first-time home buyer and are looking for financing, things can be stressful. This is especially true if you’re in a competitive housing market and getting good financing plays a big role in whether or not you can buy the house of your dreams. Not sure how to apply for a home loan? Check out these eight tips to learn how to get the best housing loan you can.

Save a 20% down payment to avoid private mortgage interest

Did you know that if your down payment is less than 20% of the total mortgage cost, you’ll need to get private mortgage insurance? This is money that you pay above and beyond anything toward the home itself. Instead of going towards the principal or interest of your home loan, it goes straight into the pocket of the lender, so it’s best to avoid PMI if you can.

Evaluate your credit

Before you even apply for loans to see what sorts of quotes you get, you’ll want to take a look at your credit score. The better your credit score, the more attractive you are to lenders, and the better deal you’ll get on your loan overall. It’s generally recommended to have a credit score of 650 or above before trying to get a home loan.

Apply to multiple lending institutions in a short period of time

When you apply to get a home loan, most lending institutions will run a credit check on you. This, in turn, can harm your credit score, so it’s a good idea not to spread out when you’re applying for a home loan quote. If you apply to multiple sources all within a few days of each other, you will avoid too many negative marks on your credit.

Have the home inspected before purchase

When determining how much you should apply for, make sure you’ve had the home inspected. While some sellers will offer to fix problems with the house ahead of time, others will put that responsibility on you. As a result, you’ll want to negotiate your price to be even lower so that you can cover those extra costs. One of the biggest culprits of major expenses in new home purchases is if the sewer’s main line isn’t up to code. This one part of the house can be overlooked by an inspection and cost you lots in the long run, so make sure to ask your real estate agent and home inspectors about it.

Consider asking for an amount to cover repairs, too

Even if a home looks good on paper, the odds are high that you’ll discover some sort of issue even after a home inspection has been completed. These expenses can add up quickly, so it can be worth rolling some repair costs into your loan, too, if you have the option. Researching roof repairers and other contractors can help you determine how much extra equity to ask for when you’re taking out a home loan so that you can buy with peace of mind.

Get a fixed-rate mortgage

It’s always best to get a fixed-rate mortgage, because you know what you’re getting yourself into. An adjustable rate mortgage can end up costing you much more if it goes up, and if you ever want a lower mortgage rate, you’ll likely be able to refinance your loan to save a few percentage points. As a result, it’s best to always choose a 15- or 30-year fixed rate loan.

Understand who will service your loan

Sometimes mortgage lenders are bought out by other companies or banks. In these kinds of situations, it can become frustrating to know where to send your mortgage payment each month. It never hurts to ask who will service your loan in these kinds of situations, so that it’s always clear. This allows you to stay on top of your home loan months or even years into its life.

A small percentage off of interest still makes a difference

Although it might sound like saving .125 percent on your home loan is relatively negligible, over the course of a 15- or 30-year loan, that amount actually adds up. If your loan is $250,000, you’ll pay $11,250 in interest at a 4.5% interest rate and only about $10,900 with a rate of 4.375%. Over 30 years, that $350 amounts to a little over $10,000 in savings overall. Because buying a house is so expensive, it never hurts to shop around a little to see whether you can lower your overall costs.

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