Applying for a mortgage is not a walk in the park. There are certain things about mortgages that most people don’t understand, especially first-timers. If you have never bought a home before, you may need some help even reading the fine print, as most of the terminology is hard to understand.
When it comes to mortgages, there are some facts that you should know. Not understanding these facts might cost you lots of money in the long run. Before applying for a mortgage, it's best to understand all the details. There is much information to help you better understand what goes into a mortgage application; from debts to credit score tips, the list is endless.
If you have never applied for a mortgage before, this post is for you. Here are three essential things about your mortgage. Read about these facts to ensure you do not go into this situation blind.
1. Shopping Around Cannot Hurt Your Credit Score
Perhaps you have been told about applying for new credit lines and how this can negatively affect your credit score and credit report, which is true. However, a distinctive feature within your FICO score allows you to shop around for mortgages and compare their rates without worrying about your credit being affected.
There is something called the “normal shopping period.” This means that applying for your mortgage or auto loan within this period will be considered a single credit application. This works best for scoring purposes. As a pro tip, always rate shop within a two-week time frame to be safe since different lenders use different models.
Also Read: Never Pay More Than This Percentage Of Your Paycheck For Rent
2. Mortgage Rates Keep Changing
It’s always advisable to keep checking mortgage rates. Unfortunately, many people wrongly perceive the prices as constant, which is false. Today's prices might not be the same the following week or even month; they are always changing. So, to be on the safe side, keep checking. Remember that mortgage rates can shoot high or drop unexpectedly anytime any day. Also, it's essential to note that different lenders offer different rates simultaneously.
3. You Need A Huge Down Payment
You need at least 20% of the total loan amount, which has been the case for many years. However, if you do your shopping, you can pay a down payment of as little as 3%. This is especially true if you use a conventional mortgage backed by Freddie Mac or Fannie Mae. Also, if you qualify for USDA or VA, available for rural homebuyers or veterans, you can get a mortgage without paying a single penny as a down payment.
Bottom Line
Anything related to money requires some prior planning and research. We hope these points helped you better understand your mortgage and how to manage it. Always read the fine print before committing; if you don’t understand, ask for guidance.
