4 important factors to consider before you apply for a mortgage

Gone are the days when buying a home was meant for the wealthy. Whether you are looking for your dream home or to make a property investment and you don’t have cash, you have an option of applying for a mortgage.

Realtors are coming up with various projects every year to enable home buyers to purchase their dream homes. While the housing packages come with world-class amenities that may be quite tempting, home buyers need to know that they have to pay a hefty price for these. Well, taking a home loan is a crucial decision that you have to make a lot of considerations before going on with it like you have to check current mortgage rates. The following are some of the important factors that you must consider when taking a mortgage.

1. The amount of loan that you want

While it’s you who can decide the amount of loan that you require, it is sometimes a good idea to consult the financial experts in matters concerning money. They can guide you in picking the best scheme that suits your needs.

Borrowing what you know you can repay without much sweat is good because you won’t be stressed about the loan. And since the amount of money that you borrow will determine the repayment, you should make sure that you don’t borrow more than you can pay regularly.

2. Your credit score

Your credit score plays a significant role in you being approved for a mortgage. Generally, a credit score of 660 or higher is considered prime, while a credit score of lower than 620 is considered subprime. What this basically means is that if your credit score falls in the prime range, then you qualify for a mortgage with a lower interest rate. But if your credit score is considered subprime, then your interest rate will be higher, and you may face difficulty being approved.

3. Type of mortgage

The type of mortgage that you choose can have a significant effect on its repayment because the rates of interest to be paid varies. There are two types of loans. The fixed and variable loans.

Fixed: in this case, the interest rate remains the same for the entire term. Whether there are fluctuations in the interest rate fueled by market changes or not, there will be no effect on the amount that you need to repay. This type of loan is ideal since you will be paying the same amount throughout.

Variable: in this case, the interest rate changes according to the changes in the market rates making the repayments to vary as well. This type of loan may not be easy to budget.

4. The lender

When choosing a lender for your home loan, it is crucial that you carry out extensive research to get a suitable financial institution. You can check with a few reputable banks or financial companies for their terms and conditions in regards to loans and repayment options. Other than that, you should also check their penalties, customer service, etc. Your real estate agent can suggest the financing entities she feels the most comfortable with based on his/her experience with previous transactions.