Purchasing a home is likely to be one of the most significant financial decisions you’ll ever make. If you’re like most people, you’ll need a home loan to finance that purchase. Asking the really tough questions – and even the seemingly easy ones – will help you choose the right type of home loan and pay it off on time. Below, we’ve put together a few FAQs about home loans so you can make an informed decision and know what to expect.
How Can I Find out How Much I Qualify to Borrow?
Most lenders offer online prequalification tools that will indicate how much you can borrow. Alternatively, you can also visit a few lenders in your area or connect with them on call to find out how much you can borrow.
Is There Anything I Should Not Do While Applying for A Home Loan?
You can start shopping for a home after you receive a prequalification letter from the lender. However, until you close on your loan, make sure not to apply for any new credit cards or loans, repay all your debts at once, co-sign a loan with someone, quit or change jobs, or skip payments. Doing any of these things can cause your credit score to change, which could delay the final approval from your lender or even result in a denial.
What Is Mortgage Insurance? Is It Mandatory?
Mortgage insurance protects the lender if you miss your loan payments. They are only required in the case of FHA loans or if you put down less than 20% in the case of a conventional loan. Mortgage interest, property taxes, and insurance payments are tax deductible.
What Is the Apr?
APR stands for Annual Percentage Rate. The APR includes your interest rate, prepaid charges, and loan points, which is why the APR is usually higher than the interest rate alone. To make sure you’re getting a good deal on your loan, it’s important that you compare APRs on different mortgage options.
Can I Get a Home Loan if I Have a Bad Credit Score?
Some lenders will work with borrowers who have bad credit. However, you may have to pay a much higher interest rate than someone with a good credit score.