Demystify major mortgage questions
Taking out a mortgage loan is a very important decision in your life. At the time of the loan process, a wide variety of mortgage questions crowd in your mind. Unless and until you get satisfactory answers to these questions, it becomes difficult for you to make the mortgage buying decision. Here we discuss about some questions that frequently come to your mind.
Interest rate
Perhaps the first mortgage question that comes to your mind while taking out a mortgage loan is about the mortgage rate of interest. Mortgage rates vary across lenders and rates also change over time. So, you must be aware of the current mortgage rate offered by a lender. Again, here it is to be noted that your credit score is very important to obtain a mortgage loan at a very cheap rate. If you have a poor credit score, your chance of getting a new loan with best rate is significantly reduced.
In order to effectively compare the mortgage loans offered by different lenders, you must know the annual percentage rate (APR) associated with different mortgage loans. APR reflects true cost of a mortgage loan.
Minimum down payment amount
One factor that often comes in the way of getting approved for a mortgage loan is the minimum down payment amount. The minimum down payment amount required to get a mortgage loan varies from 5%-20% of the purchase price of the house. If you can make more down payment, the rate on the mortgage loan is reduced and vice versa.
Prepayment penalties
There may be some prepayment penalties associated with mortgage loans. Sometimes the prepayment penalty may be equal to 6 months interest and sometimes it may be 1% of the loan amount. Prepayment penalties are applicable when you lower down the principal balance by more than 20% or when you opt for mortgage refinancing. Before applying for a mortgage loan, you must be aware of the associated prepayment penalties.
Qualifying guidelines
Apart from the down payment amount, there are many other qualifying guidelines, related to credit score, income, assets, liabilities, employment etc. The qualifying criteria to obtain FHA loans or VA loans are comparatively easier than the conventional loans. Unless you are aware of the required qualifying guidelines, it becomes difficult for you to make the right mortgage move.
Documentations
One important thing in the mortgage loan process is the documentations. If you do not have all the documents ready with you, you may not be approved for the loan even if you meet the qualifying criteria. So, you need to make conscious efforts so that you are ready with all documentations.
Loan processing time
One important mortgage question that may come to your mind is what is the loan processing time. It may take two weeks or it may take 2 months also. Depending on the loan processing time, you have to make the decision.
These are the main mortgage questions that may come to your mind. Apart from these, many other questions may also come to your mind. However, you need to ensure that you have answers to all these questions before applying for the loan.
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