For the majority of us, buying a home is likely one of the loftiest purchases we will make in our lifetime. And the feeling of accomplishment that comes along with being a homeowner is just as large. But before jumping the gun there are some very important prerequisites to check off before signing on the dotted line. Here are eight questions to ask before accepting a mortgage.
How much money do I need to purchase a home?
This question is one that starts from within. Take a deep look at your income as well as your expenses. Evaluate how much you can dedicate towards the down payment. The more you can put down, the better your chances at getting a lower monthly payment. Once you’ve got a good idea on how much you can put down, you also want to consider your credit history. Your credit standing is a huge determining factor for how high or low your interest rate will be, which will also ultimately determine the cost of your home. Finally, be prepared for the closing costs. In some instances the seller will cover the closing costs, but this is not always the case. Make sure you are prepared to cover these costs in the event you are unable to negotiate this cost to be paid by the seller.
What is the difference between rates with percentage and rates with APR?
An APR is the annual percentage rate, which encompasses the interest, fees and points. This is the rate you will pay in addition to the principal. When you are working with lenders on rates, be sure to ask about the APR and not just the interest because the percentage rate with interest does not include the points and fees, which you are also responsible for.
Am I required to get mortgage insurance?
You will likely be required to get mortgage insurance if your down payment is less than 20% of your loan. PMI, also known as Private Mortgage Insurance, guarantees that the lender receives 80% of the loan should you default on your payments. There are two exceptions to this rule, and both are government loans: FHA loans and VA loans. The government insures both of these loan types. VA loans do not have any insurance payment associated, but the FHA loans do require a monthly payment.
How does my length of time in my house change things?
Before purchasing a home it is extremely important to truly consider whether this is simply a starter home that you only want for a few years or if this is the home you want to grow into and keep for a while. The length of time you plan to spend in a home will help you choose the best mortgage repayment option. For instance, if you plan to stay in your home and pay off your mortgage over its lifetime, you might opt for a fixed rate mortgage. If instead, you know this is only a home you plan to line in for less than ten years, you are likely better off taking a lower interest rate and the Adjustable Rate Mortgage.
There are of course many other questions to consider before purchasing a home, but these should get you started. Remember, it is better to do as much research as possible before making any major commitments so you know exactly what you are signing up for. Be sure to investigate both short and long term benefits and effects of all of your options.
When you’re ready to advance from planning to buying, contact an agent at 123 My New Home to help you find your dream home, in the right neighborhood, and in your desired monthly payment range.