The interest rate on your mortgage is an important consideration that has an impact on your monthly mortgage payment. But interest rate isn’t the only important thing to consider. Here are some other important factors to help you prepare to apply for a mortgage and avoid surprises.
- Your Credit Standing
Do you know your credit score and what is on your credit report? You should if you are thinking about buying a home and applying for a mortgage. Your credit score and report are important information that lenders look at in making credit decisions. It’s a good idea to check your credit at least three months before you are considering buying a home. This can help you spot and resolve inaccuracies in your report. Under federal law, you are entitled to a free credit report from each of the three major credit bureaus every 12 months. For more information and to request your credit report, visit AnnualCreditReport.com.
2. Your Loan Amount
Before you buy, get a good sense of how your borrowing amount translates into a monthly payment and how it fits with the rest of your expenses. The loan amount you are requesting may be larger than the amount you can comfortably afford based on overall expenses and lifestyle factors. Make sure you can afford the home you will be financing.
- Your Down Payment
If your down payment is less than 20% of the purchase price you may be required to pay monthly Private Mortgage Insurance (PMI). This amount is added to your monthly loan payment.
- Fees and Prepaid Costs
In addition to the down payment, there are upfront costs that will be due at the loan closing. Expenses that are part of real estate transaction could include credit reports, appraisal fees, and documentation and administrative costs. Prepaid costs related to the home include property tax, homeowner’s insurance, and mortgage interest. Closing costs can vary by location and your situation and could total thousands of dollars. You will be provided an itemized list of fees required to close your mortgage loan and you should review it carefully.
Learn more about mortgages with The Mortgage Center at Enterprise Bank.