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 terminologies are hard to understand.
When it comes to mortgages, there are some facts that you should know. Not understanding these facts might end up costing you lots of money in the long run. Before applying for a mortgage, it's best you first understand all of the details. There is a lot of information out there 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, then this post is for you. Here are three essential things that you need to know about your mortgage. Read about these facts to make sure 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, there is a distinctive feature within your FICO score that allows you to shop around for mortgages and compare their rates without having to worry about your credit being affected.
There is something called the “normal shopping period.” This means that if you apply for your mortgage or auto loan within this period, it will be considered as a single credit application. This works best for scoring purposes. As a pro tip, to be on the safe side, always rate shop within a two-week time frame since different lenders use different models.
2. Mortgage Rates Keep Changing
It’s always advisable to keep checking mortgage rates. Unfortunately, many people have the wrong perception that the prices are constant, which is not true. The prices you see today might not be the same the following week or even month; they are always changing. So to be on a safe side, keep checking. Keep in mind that mortgage rates can shoot high or drop unexpectedly at any time, any day. Also, it's essential to note that different lenders offer different rates at the same time.
3. You Need A Huge Down Payment
The truth is you need at least 20% of the total loan amount, and this 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 conventional mortgage backed by Freddie Mac or Fannie Mae. Also, if you qualify for USDA or VA, which is available for rural homebuyers or veterans, you can get a mortgage without paying a single penny as a down payment.
Bottom Line
Anything to do with money needs some prior planning and a bit of research. We hope these points helped you better understand your mortgage and how to manage it. Always read the fine print before committing, and where you don’t understand, be sure to ask for guidance.
