Thursday December 17, 2015
If you’re in the process of taking the leap from renting to owning, you’ve probably done everything you can to save up for the down payment and started your home search. If you’re about ready to get pre-qualified for a mortgage, make sure you know everything you can about the process. Here are seven things you probably didn’t know about mortgages:
Guide for First Time Home Buyers
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7 Surprising Facts About Mortgages
- You don’t need to save 20% in order to purchase a home. Depending on the type of home loan you pursue, you can qualify for a mortgage by putting down as little as 3% of the purchase price.
- If you don’t put down 20%, you will have to pay mortgage insurance. Mortgage insurance exists so the lender can be reimbursed in the case that you default on your home loan. Your mortgage insurance payments are made monthly and will vary depending on what type of loan you have, how much of a down payment you put down, how large your loan is and your credit score.
- Mortgage rates fluctuate daily. Just as stocks and bonds rise and fall throughout the day due to market conditions, mortgage rates change rapidly. Because of this, you want to make sure you lock in a good mortgage rate instead of opting for a floating mortgage.
- Self-employed individuals have the hardest time qualifying for mortgage loans. Self-employed business owners often struggle to get approved for a mortgage because they write off so much of their income that it appears as though they are bringing home nothing.
- Opening new lines of credit affect your ability to qualify for a mortgage. When you open a new line of credit or shift credit around, your credit behavior changes. Changing your credit behavior can negatively impact your FICO credit score and make it very difficult to qualify for a home loan.
- Purchasing a car before you purchase a home is a huge mistake. Unless you purchase a car in cash, avoid purchasing a car when you’re looking to get qualified for a mortgage. In this situation, it doesn’t matter what the loan amount is, but rather what your monthly payments will be. Adding the expense of a car payment to your monthly financial obligations reduces your chances of being approved because your available income each month decreases.
- Changing careers right before you apply for a mortgage may be detrimental to your chances to qualify. Lenders like to know that you’re going to be able to pay your mortgage, and one of the best ways is by showing that you’ll continue making the amount of money you’re making at the time of applying. This doesn’t apply if you’re a recent grad and can prove your future income.
At Smith Douglas Homes we understand that the process for buying a home can be confusing. Our New Homes Specialists are ready to take your call and help you through every step of the process. Contact a New Home Specialist at Smith Douglas Homes to start the conversation today.
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