Mortgages are simple loans that will allow you to purchase your home and pay for it over time. While the concept of a mortgage is simple, it’s the unique benefits that many different types of mortgages offer that will help you get the best deal. Talking to your insurance agent about your mortgage will help you determine if you have the right one for your individual needs.
What Is a Mortgage?
A mortgage is a loan that pays for your home and, in turn, you pay the lender back over time. You will pay a specific amount of interest on the loan every month in addition to the principal until it is paid off. Because the lender offered you the money to pay for your home, a lien is placed on the title that gives the bank first rights to the property if you default on the loan or the property is damaged in a fire or other catastrophic event.
What Types of Mortgages Are Available?
There are many types of mortgages that you may be eligible for. First-time home buyers may be eligible for an FHA or USDA loan. Veterans or active-duty military may be able to qualify for a VA home loan. There are also Fannie May and Freddie Mac loans that are designed to offer specific benefits such as lower down payments and reduced interest rates. Conventional home mortgage loans are easy to qualify for and will provide long-term benefits if you qualify for them.
The Debt-to-Income Ratio
Your debt-to-income ratio compares how much money you bring in to how much money you pay in living expenses per month. If your debt is too high compared to how much money you bring in each month, you may not qualify for the loan. Most banks and lending agencies like to see at least twice as much money coming each month compared to what is going out.
Watch Your Credit Score
Your credit score is a valuable tool that banks will use to determine your creditworthiness. In most cases, banks want to see a credit score of 620 or better to qualify you for a specific type of mortgage. Paying your bills on time and paying off small debts will help to keep your credit score high and your debt-to-income ratio in line with what the bank wants.
What to Expect While Applying for Mortgage
The mortgage process begins when you file an application to a potential lender who may be a bank/ credit union or even private parties with different lending standards than banks and credit unions. Through the application, your lender will gather information about your debt-income ratio, credit scores, social security numbers, previous tax returns, and so on. Once they process your information, they would determine if you are eligible for the mortgage loan and if yes, what interest should be charged from you.
Whether you are looking to buy a new home or refinance your old home, it’s important that you find out as much as you can about the loan process and which type of loan will work best for you. To find the best policies to meet your needs and your budget, contact the experts at Duane Weber Insurance, Inc. in Kent, Washington. Our dedicated team is eager to get you covered today.