There are several things you need to consider before buying a house, and mortgage is on top of that list. Taking a mortgage is a major financial decision because it becomes a major part of your monthly budget for several years. In fact, getting the wrong type of mortgage or lender has lead many aspiring home owners to financial ruin.
A mortgage is the type of loan that helps buyers finance the purchase of properties, such as a house or a condominium unit. You can usually receive as much as 80% of the total value of the property and the property itself becomes the collateral for the mortgage. So before you sign up for anything, here are some things you need to know about mortgages:
- Loan amount – Before applying for a mortgage, you should decide first how much you want to borrow. You should take into careful consideration your capacity to pay and how much you can afford to put up for the down payment. Imagine an amount where you see yourself comfortable paying off the monthly amortization while enjoying the house you’ve bought.
- Mortgage rate – Be careful of lenders offering lower interest rates because it doesn’t necessarily mean more savings for you. There are lenders who offer low interest rates but high closing rates. Never look at the interest rate alone. Weigh all of the other factors of the deal before choosing a mortgage lender.
- Monthly payments – Getting a mortgage is a very big financial responsibility. Make sure that your monthly payment is something that you can pay comfortably, along with your other pertinent expenses such as food, transportation, medical expenses, utility bills, savings, tuition fees, etc.
- Term – Mortgages often come in 15 and 30-month terms, but there are other lenders who offer 5, 10 and 20-month terms as well. Remember that the shorter the term of the loan, the bigger the savings for you. Shorter terms mean lower interest rates though the monthly payment is higher.
- Closing Costs – Closing costs usually include taxes, home insurance, lenders fees and payments to insurers, escrow, etc. Make sure that you know the closing costs so you won’t be caught off guard by these additional fees. Most importantly, be sure to get a quote from several lenders so you can compare their services. It is important to be thorough before deciding on a lender, so take all the time you need before making your final decision.