The process to purchase a home can be exciting, but full of uncertainty. It is important for borrowers to take the time to learn more about how mortgages work and what to expect when they file an application. This way, they can know what to expect as they navigate this process and work on buying their first home.
Types of Mortgages
There are a variety of different mortgages to consider. Some of them, other than a conventional loan, are backed by the federal government. All lenders offer conventional loans, but others may only offer some of the main types of mortgages. It is important to speak with a lender like Delmar Mortgage to get more information about the types of mortgages they offer.
- Conventional – Most borrowers get a conventional loan. Requirements often include a good credit score and a larger down payment, but they can be a great option for most people.
- FHA Loan – FHA loans are designed to help those with lower incomes or poor credit to purchase a home. They can be a great option for first-time borrowers who meet the requirements.
- VA Loans – VA loans are offered for veterans and service members. As long as the person qualifies, they do have the opportunity to get a loan with no down payment.
- USDA Loans – These loans are offered to those who have a lower income in a rural area to help them purchase a home. Like VA loans, some borrowers can avoid having to have a down payment.
The Length of the Mortgage
The length of the mortgage can vary, depending on the borrower’s preferences and needs. Most commonly, borrowers will choose a 30-year mortgage, as this enables them to lower their monthly payments while they pay back the loan. Those who want to pay it off faster, though, may want to choose a shorter repayment period. Common options include 10, 15, or 20 years.
Qualifications for a Mortgage
Before applying, borrowers will want to make sure they are qualified for the loan. They will want to check their credit score, make sure they don’t have a high debt-to-income ratio, and work on improving their finances if needed to meet their goals. Depending on the loan, they’ll want to make sure they have enough money saved for the down payment, closing costs, and other expenses. It is important to consider the exact type of mortgage the borrower wants to apply for, as the qualifications can vary from loan to loan.
Pre-Qualification Versus Pre-Approval
First-time borrowers should be aware of the difference between pre-qualified and pre-approved. In most cases, it is better to work toward getting a pre-approval, as this allows potential sellers to see that the borrower is able to get a loan to cover the purchase. A pre-qualification doesn’t have as much power. With a pre-approval, borrowers know how much they can borrow and can start looking at homes within their price range.
If you’re ready to buy a home, now’s the time to speak with a mortgage broker to learn more about the process and to get a pre-approval. This will give you the ability to start looking at homes within your price range and to put in an offer once you find a home you love.