1. What do you need to get a mortgage?
The first and most important key to getting a mortgage is to establish credit. This will show lenders that you were reliable when it came to pay off past debts, and you’ll be a reliable lender now. Ways you can establish credit are with credit cards, but also with any student loans or car loans.
2. If you have bad credit, how do you improve it?
Before you take a guess at your credit, check your official credit report with one of the main credit bureaus. Every year, you can download one free copy of your credit report. You may be surprised to find that you’re not that bad.
If you do have bad credit for a fact, it’s most likely due to aged activity like old collection, medical bills, or something you don’t know about. If you find these types of “errors”, fixing them can boost your score. If you know you have bad credit because of late payments, make sure you’re making payments on time and your credit utilization is not high.
3. What’s the difference between mortgage pre-approval and mortgage pre-qualification?
Mortgage pre-qualification does not hold the same weight that mortgage pre-approval does. You can have somebody go online and print you a pre-qualification letter.
Pre-approval takes more time and effort to get, but it shows that you’re serious about getting a house. If you’re actively searching for a home and are ready to buy, getting a pre-approval is in your best interest.
4. How much do you need for a down payment?
The standard that lenders highly suggest is a 20% down payment. So, if you are looking at a home that will be $150,000, that means you’ll need a $30,000 down payment. If you don’t have that much money laying around, there are other options for you.
You can put down less, but you might wind up paying a PMI (private mortgage insurance). This could be an extra $50-$100 a month on top of your mortgage payment. If you are in the military, a veteran, or family of a veteran, you can potentially avoid the PMI with the Veteran Affairs loan.
5. What kind of down payment assistance is available?
If you need help with a down payment, the first place to look is the bank of Mom and Dad, if it’s available. There’s nothing wrong with being gifted money, but make sure you tell your lender where that money came from.
Otherwise, there are over 2,000 programs across the country to take advantage of, granted that you are eligible based on your income and credit.
6. What types of home loans are there?
The types of loans available boil down to two categories: adjustable rate and fixed rate.
Adjustable rates mean your interest can change over time based on the market. A fixed or “term” rate means you’ll have the same mortgage rate for the length of the borrowing period.
For more information on mortgage loans, credit, and first time buying, visit Realtor.com.