Did you know that there are more than 200 types of home loans available? Each comes with different features and eligibility criteria. As such, it can be challenging to select the right one, especially if this is your first time financing a home. To narrow down your options and get the best home loan that meets your needs and budget, here are 10 things you should ask for when shopping for a mortgage.
Know the features and risks of different types of home loans
The type of home loan you get can have a significant impact on your finances. Here are a few things to consider when selecting a loan.
Pre-approval is when a lender gives you a formal approval to borrow a certain amount, based on your current financial situation. This can save you time and effort when you start shopping for a home, especially if you are buying at a time when the real estate market is competitive and inventory is low. Getting pre-approved is a simple process where you provide some basic information, such as your employment, income, and credit history. Pre-approval is optional, but if you are looking to purchase a home, we highly recommend that you get it. Getting pre-approved makes the process a lot easier by letting sellers know that you are a serious buyer who is ready to make an offer. Pre-approval also gives you the upper hand in a competitive real estate market since you can act quickly and are likely to be able to purchase the property you want.
Research your eligibility
Before you start shopping for a home, there are a few things you can do to make sure you are eligible for a home loan. You can get a free copy of your credit report from one of the major credit bureaus or review your report for free through your lender. This will allow you to correct any errors in your report, which could impact your ability to get a loan. You should also check the property’s assessment value to see if it is at least equal to the amount you intend to borrow. This will ensure you have enough equity in the property.
Check your credit score and know your loan options based on it
It’s important to know what your credit score is before you start shopping for a loan. Having a good credit score can make it easier to qualify for a lower interest rate and better loan terms. If you know your credit score is below what lenders typically look for, there are still things you can do. If you are applying for a mortgage, it’s important to know what your credit score is before you start shopping for a loan. Having a good credit score can make it easier to qualify for a lower interest rate and better loan terms. If you know your credit score is below what lenders typically look for, there are still things you can do. One thing you can do is pull a free credit report from one of the major credit bureaus. This will allow you to see where you stand and will let you know what steps you can take to improve your score. If you have negative marks on your report, there are ways to remove them; one of the easiest ways is to initiate a credit freeze.
Check the type and condition of the property you want to buy
Are you buying a new or an existing property? New construction often offers more high-end features, but comes with a high price tag and can be challenging to finance. On the other hand, existing properties might be a better choice if you are a first-time home buyer and want to keep your monthly payment low. During the home loan process, the lender will likely send out a property inspector to inspect the property and provide you with a report on the condition and estimated repair costs, if any. If the property is brand-new, you may need to get an independent inspection to determine the quality and materials used in the construction. If you are buying an existing property, make sure you check the condition of the roof, HVAC system, foundation, and other major systems.
Check if there are any ongoing repairs or renovations required
You should find out if there are any ongoing repairs or renovations required before you buy a property. There may be an item on the property’s disclosure report, such as a roof repair, that the seller is responsible for. Or there may be items the seller agreed to do and either hasn’t started or just hasn’t finished yet. You’ll want to know about these items in advance so you can factor them into your offer, or decide if you want to keep negotiating or walk away from the deal.
Ask for a break down of fees and charges
There are a lot of fees and charges associated with home loans. Make sure you know what these are and what they are for. Here are a few things to ask for. – Origination fee: The lender’s fee for providing you with a home loan. Fees vary from one lender to another and depend on many factors, including the size of the loan, the type of loan and the property you are financing. – Closing costs: The fees associated with closing the home loan, including the appraisal, credit report, title search and insurance. – Loan fee: A fee charged by the lender if you choose to change the type of loan or extend the loan term. – Escrow fees: Fees charged to set up an account to pay taxes, insurance and any other ongoing expenses.
Confirm everything in writing
When you are comparing home loan offers from different lenders, it’s easy to get overwhelmed by the volume of paperwork. To ensure that you understand everything you are signing, make sure you get everything in writing and review it before you sign any documents. This includes the terms of the loan, the costs and fees associated with the loan, and any other documents related to the loan. Figure out which lender and loan type would be best for your situation, and then go in prepared. With this strategy, you should be able to find the best home loan for your situation.