by Bob Shannon
When you’re new to the real estate game, mortgages can feel like a giant mystery. There are so many tiny steps involved in this process, and there are also some pretty sneaky hidden costs if you’re not careful. So how can you learn all that you need to know about mortgages without spending hours researching online? Well you can start with the steps in this mortgage guide, courtesy of Sandra Sells the Shore.
Pull Credit Reports
Qualifying for an affordable interest rate on a home loan typically requires a considerably high credit score, so you will want to check your reports for any potential inaccuracies. Most mortgage companies require a credit score of at least 620 to be approved for a home loan. So if yours is lower, you may want to put this purchase off to avoid paying extremely high interest.
Save for Closing Costs
Are you prepared to cover closing costs associated with buying a home? Estimating these expenses, which can include an earnest payment, inspection costs and agent fees, can keep you from being surprised as you come to the end of the buying process. On average, you can expect to pay anywhere between 2% to 5% of the home value in closing costs and fees.
Also Save for a Down Payment
Now of course you may also want to save additional cash to cover a down payment. Most folks aim to save about 20% to improve their mortgage approval chances and lower their interest rates. Also keep in mind that as Investopedia notes, some loans may not require a down payment if you qualify for these special homebuying programs.
Be Prepared to Make an Offer
In today’s competitive market, buyers need to act fast if they want to avoid being outbid on their dream home. Many homes receive multiple offers and go pending in an average of 33 days. So if you plan on buying a home in the coming months, you will want to have an edge over other prospective buyers.
Get a Pre-Approval Letter
Being pre-approved for a mortgage can give you this edge and ensure that you can make a winning bid in a timely fashion. Actually, you may want to make this your next step after pulling your credit reports, so that you will be aware of any potential roadblocks in the buying process. After all, you don’t want to find your perfect home only to find out you’re not approved for a loan. During this time it’s also important to determine whether you should “pay points” on your loan, which will help reduce the interest rate. You can use online calculators to help you decide if this is a route you should explore when purchasing your home.
Buy a Home With Bitcoin
Did you know that you can use bitcoin to purchase a home? If you have enough bitcoin saved up, keep in mind that you will likely need to buy your home outright in order to use this currency, and the seller will need to agree to this arrangement. Unfortunately, lenders do not accept bitcoin for down payments on mortgages at this time. Although you may be able to find locations where you can sell your bitcoin for cash to help with your down payment or closing costs.
Check for Refinance Deals
After you’ve been in your home for some time and have made your monthly mortgage payments, you may want to look for ways to reduce those payments. For example if you did have to go with a loan that has a high interest rate, and you’ve made improvements to your finances since, you may be able to refinance your existing mortgage.
Stay Organized
From gathering credit report information to getting a preapproval letter to finally closing, you want to keep all of your documents as organized as possible. This ensures you can easily find a file whenever you need, rather than have to sift through your inbox or downloads file. While storing everything on the cloud is ideal, you still want to save space. To do so effectively, you’ll need to use this easy PDF compressor to reduce file size, and then you can combine them into one folder or merge them as needed. The point is, keeping your paperwork easily accessible will eliminate headaches, whether you’re buying or refinancing.
Honestly, mortgages aren’t as complicated or scary as they may seem. Neither is the homebuying process. The most stressful part is usually getting approved for a home loan, so once you’ve crossed this step off of your to-do list, it should be smooth sailing. Also remember that you may be able to leverage your bitcoin to help you buy your dream home. So explore the possibilities and take the steps needed to take the worry out of purchasing your first home.
