Getting a housing loan is kind of heavy. You cannot expect the trip to be smooth, especially if it is your first time. As with most big decisions, you need to start from small steps. So if you have decided to secure a mortgage, here are some smart tips you can take into consideration to get you on the right track.
Budget Wisely. First and foremost, you need to assess the type of home and mortgage you can afford. Search around Maui for the kind of the house you want and compare the prices to get a ballpark figure. The following are the things that you should take into consideration when planning for your budget.
- Monthly debts
- Estimated cost of living expenses
- Amount saved for a down payment
Decide on the Mortgage Type. When you’ve figured the type of home you want, you will eventually know what kind of assistance you need, including the loan you are eligible for. You might also want to ask yourself if you qualify for the following.
- A military veteran? Consider a Department of veterans Affairs (VA) loan.
- A first time homebuyer with good credit? Consider a first time home buyer loan via the Federal Housing Authority (FHA). FHA loans require only a 3.5% down payment and typically come with good interest rates.
- Looking for a mansion? For really expensive homes you would want to consider a jumbo loan.
Above all this, when you agree for a sale price of the home, remember that it isn’t really the true cost of owning one. So you need to look at the monthly mortgage amortization schedule to see the total amount of principal and interest you will pay. For example, if you are borrowing $250,000 for 30 years at 4.30%, it will cost you around $445,384. To check, you can use some online mortgage calculator to estimate your payments over the life of the loan.
Mortgage Broker or Lender?There are two ways you can find a loan: seeking help from a mortgage broker or dealing directly with a lender. If you go with it alone you will probably get lost in the middle of doing all the legwork. The risk is that, you might end going from one lender to another, comparing rates – this is just a waste of time.
Mortgage brokers typically charge 1% to 2% of the loan amount but they can help explain to you which type of mortgage suits you best, and help you do the leg work as well.
Lenders will help you get a loan (but don’t expect it to be a 100% financing), depending on your situation. Your lender is a not a good judge though in assessing how much you can affords. Banks only focuses on how to maximize their business. Make sure that when you take a loan, you don’t overextend yourself.
Assess your credit standing. Now it is time to check your credit report. Lenders in Maui typically requires an annual credit report, which you can obtain from your company there are also some lenders that don’t.However, a bad credit does not automatically make you any less. It is just one factor which may affect how much loan you can take.
Get your paperwork together. Since you have decided to secure a mortgage, it is time you arrange some pertinent documents. Be extra careful with your finances and have everything you need to back up the numbers. The following are some of the most important documents you may need.
- Government ID
- Tax returns
- Income statements
- Proof of all assets
Get pre-approved. Pre-approval is not a guarantee that your loan will be considered. It helps you know what you can afford based on your income, credit score, and current lending condition. So consider it as diploma of the mortgage process. To ensure you get the best deal possible, it is highly recommended to go at least three lenders.