The time has come to purchase a new home. It doesn’t matter if it’s your first home or you’ve owned several in the past, you’re ready to take action.
But unless you have enough cash to buy the home outright, you’ll need to qualify for a mortgage.
Here’s the definition of a mortgage, as shared on the United States government consumer finance website:
“A mortgage is an agreement between you and a lender that gives the lender the right to take your property if you fail to repay the money you’ve borrowed plus interest.”
It’s one thing to understand that a mortgage is a loan that allows you to buy a home. It’s another thing entirely to know what you’re looking for and how to secure a mortgage that meets all your personal and financial requirements.
To ensure that you’re on the right track, here are a handful of important questions to answer before applying for a mortgage:
- Do you need a mortgage, or do you have the financial means to pay for a home with cash?
- How much money do you want to put down on your home? Will this allow you to avoid private mortgage insurance (PMI)?
- Will you borrow from a local lender that you have a relationship with? Will you open up your search to both local and national lenders?
- Are you familiar with the terms and conditions of a mortgage loan, such as the interest rate, term, and what the lender can do if you don’t repay it?
- Do you have a pre-approval letter from the lender?
- How long will it take for the lender to prepare your file for closing?
While these questions are among the most common and important, many others are likely to come to light as you shop for a home and mortgage. Don’t ignore any of them, as doing so increases the risk that you’ll make a costly error.
Tip: if you have questions that you don’t know how to answer, consult with you loan officer or broker. They should be able to provide all the information and guidance you require. If they can’t, your best bet is to find another lender or broker.
Final Thoughts on Applying for a Mortgage
Buying a home with a mortgage is a standard process that millions of people go through every year.
If you’re ready to head down this path, ask yourself the questions above and then answer them to the best of your ability.
Buying a home—with or without a mortgage—is one of the biggest personal and financial decisions you’ll ever make. Be sure that you know what you want, what you need, and how to protect your financial interests along the way.