Finding the optimum mortgage plan for your individual needs is always a challenge, but arming yourself with knowledge and research is the best thing you can do to make sure you understand not only what you’ll need, but why. Read through these commonly asked questions regarding primary residential mortgages to ease some of your immediate concerns. Also, always rely on the knowledge of your mortgage broker. Learn more here.
Q: Do I need to be pre-qualified before I begin shopping for a home?
A: While technically you don’t have to – it is highly recommended. Being pre-approved will make the process smoother and faster when you find a house you like, and it will make you easier to work with for all the parties involved, from realtors to brokers and banks. The last thing you want is to find your dream home and find out you don’t qualify!
Q: How do I prepare my financial profile to apply?
A: You will need to gather several documents in order to pre-qualify for a loan and an expert mortgage broker will help you through this process. Bank statements and pay stubs for the last two months, along with W-2’s for the last 2 years are a good start. You will also need all information on your current debts, including car loans, student loans, as well as credit cards. This information will allow your mortgage broker or loan officer to assess how much you may be able to borrow, so you can start shopping with confidence.
Q: What if I have a bad credit score? Can I still apply?
A: Fortunately, there are several mortgage companies who believe in second chances. However, because having a lower score makes you a greater risk for foreclosure, you will likely have to pay a higher interest rate. You may also need to supply additional documentation than a typical standard loan to explain the discrepancies. If you have more serious credit problems like bankruptcies or former foreclosures – you may need to wait a given amount of time for your score to recover before applying. Your mortgage broker will be able to help you plan for this.
Q: How do I know if I should get a fixed or adjustable interest rate?
A: The answer to this depends on how long you intend to live in your home. Generally, the stability of a fixed interest rate is recommended for those who plan to inhabit their property for longer than seven years. But, if you have a job that may relocate you or, have other potential life changes in a nearer future – the adjustable rate has the potential to save you money with lower rates in the first few years you live in your home. Counseling with a knowledgeable mortgage broker will help you make a good decision.
Q: How Does Mortgage Insurance work?
A: Ask a mortgage broker for a more detailed explanation, but mortgage insurance operates in much the same way as auto insurance, meaning that is is there to protect you in case of emergencies. You will pay a higher monthly rate to include the premium, but in the event of a foreclosure – you would be able to file a claim that entitles you to a portion or even the full amount of your losses.