Buying a home can make you feel either giddy or frightened, or both. This mixture of emotions is understandable since a mortgage is a huge responsibility. It has an impact on your finances, choice of work, home options, and many more.
To be a more confident and well-prepared homeowner, you must learn three things that matter:
1. Down Payment
There’s no such thing as the “official” or standard down payment, although many lenders prefer 20 percent or more. Doing this is right for you too, since you can avoid paying more money with private mortgage insurance. This coverage protects the lenders, ensuring that they can still recover their earnings even if you default on your repayments.
But a down payment can be expensive. In fact, more than 35 million Americans cannot afford their homes, according to a Harvard research. But you can still own a house in Missouri through an FHA loan, which allows as low as 3.5 percent down payment.
2. Mortgage Interest Rate
Many homeowners don’t know that their fixed-rate interest doesn’t stay that way forever. It usually lasts for only five years. After that, the rate shifts to a variable one, and this can be both a good and a bad thing. You benefit if the interest rates go down. The amortization may be even lower when you’re in the fixed interest. But it can also soar, making the repayments more challenging.
Stay up-to-date with the changes in the interest rates, so you can plan your strategy on how to deal with the repayments.
3. Credit Score
A credit score is one of the most important factors that affect your mortgage. It tells your lender how diligent you are in paying your dues. It can also be a tool in determining whether to approve the loan or how much you can get.
The idea of having a mortgage can be daunting for new or first-time home buyers. But if you know what matters when choosing or repaying, it becomes less terrifying.