Are you interested in buying a new home? Maybe it’s your first, and you are feeling a mixture of excitement and fear. There is an effective way to overcome fear, and that’s through getting clear on your understanding of something. The truth is, you are like fearing the uncertainty and the unknown, so it’s time to get certain and get in the knowing. In this specific instance, the fear and uncertainty of buying a new home typically fall into the category of mortgages.
A mortgage is the amount of money you will pay each month, returning to the bank the money you borrowed to purchase your house. If you bought it with your own money entirely, then the mortgage is complete, and you are debt-free.
Oxford defines a mortgage as a legal agreement from a credit lender (typically a bank) that lends money at interest so you can take ownership of your home immediately.
Just like you take out a loan for a car or business expense, you take out a mortgage for homes and commercial properties.
Why take out a mortgage?
Not everyone has to take out a mortgage, but not everyone can pay for a property in cash or upfront. If you can’t buy it outright, you will have to take out a mortgage.
Although mortgages, because they imply debt, can be intimidating, a mortgage is actually beneficial to new and old homeowners! After all, with a mortgage, you are able to buy the home of your dreams without necessarily having the money for it! With a mortgage, you get to move into your home as soon as the closing date is effective and the housing permits.
Qualifying for a mortgage
Not everyone qualifies for a mortgage, unfortunately. Before taking out a mortgage, you will need to determine your FICO credit score. If your credit has plummeted over the years, you will have to get a co-signer, someone who has a higher credit score that is acceptable for receiving the mortgage.
A credit score merely tells the bank that you are going to, and able to, pay back your mortgage on time. Credit scores lower when you don’t pay off your credit on time. If you have never had a credit card, your score is zero, and you will either have to work that score up over time in order to receive a mortgage, or choose the ladder and find a co-signer.
Equally as important is your income, which must be represented in paystubs. Checking to make sure you are able to pay back your mortgage on time and with consistency is going to be crucial for the bank’s grant.
Finally, the bank needs a downpayment. How much money are you able to put down now, so the bank knows you are serious about this mortgage? The great thing about a downpayment, big or small, is that you are going to be able to decrease the amount you pay each month. Depending on how much you put down, this can be a great opportunity to avoid paying more in interest.
If you want to better understand your status in receiving a mortgage, you can check your mortgage qualification with an expert.
Mortgages, although intimidating, imply one thing: You are getting your house! Congratulations! Celebrate and find gratitude in your decision to move forward with the house of your dreams.