Buying your first house means getting your first mortgage. Although people tend to focus on the price of the home itself, the cost of the financing is equally important. That means if you want the best house at the best value, you need to be crystal clear on mortgages first. Here are some things you should know.
Your Score is Important
Your credit score makes a big impact on your mortgage. Most lenders won’t even approve you for a mortgage if your score is 620 or below. Also, the higher your score, the better interest rate you’ll get when applying for a mortgage. Take the time to work on your score so that it’s as high as possible before shopping for your home loan.
Debt Matters Too
Lenders will also look at your current debt load when considering your mortgage worthiness. If your debt-to-income ratio is high, there’s a chance the lender might not approve your loan. Pay down your debts as much as possible so that this is not a factor.
20 Percent is Good Idea
As USA Today reports, some lenders require you to place a 20 percent down payment when you close on a mortgage. However, some allow less, and some even approve mortgages with zero down payment. Contribute that 20 percent if at all possible. You’ll build equity faster and you’ll avoid costly private mortgage insurance.
You Should Shop Around
You should shop around for the best possible deal available. For example, many local banks and credit unions offer more favorable mortgage rates when compared to big banks. Get at least three quotes and then choose the loan that makes the most sense for you.