3 Things To Know About Taking Out A Mortgage
If you are thinking about buying a home, chances are that you will need to take out a mortgage. A home loan will have a major impact on your financial life for years, even decades. Finding the right mortgage for your needs is a must. There are a variety of lenders available when choosing a mortgage and various loan programs that may be right for your needs. Here are three things that you should know when taking out a mortgage:
Non-Conforming Versus Conforming Loans
One of the first things that you should know when you start looking at home loans is the difference between a non-conforming loan and a conforming loan. The main difference is that conforming loans meet the guidelines set up by Fannie May and Freddie Mac while non-conforming loans do not. Typically, conforming loans have lower interest rates and fees. However, there is a limit to how much you can borrow. With a conforming loan, the upper limit is $484,350. Non-conforming loan programs typically require 20 percent down and have higher interest rates, but they allow you to borrow more than non-conforming loans.
Shopping Around Can Help
When looking at home loans, getting the right rate or finding the right loan program can be a challenge. However, the best way to find a mortgage that suits your needs is by shopping around. You can look at various lenders and programs yourself in order to find one that works for you and that offers the lowest interest rates and fees, or you can have a mortgage broker do much of the legwork for you. Typically the lender will pay the mortgage broker but on occasion the buyer pays their fees. Mortgage broker fees range from 0.50 to 2.75 percent of the loan amount on average.
Credit Matters
Another thing to consider if you are planning on taking out a mortgage in the near future is that your credit will play a very large role in determining your interest rate and also how much you are qualified to borrow. With a conforming loan you will typically need a credit score of at least 630 to 650. Credit requirements for non-conforming loans tend to be even stricter. With a non-conforming loan you will need a credit score of at least 680 in addition to a higher down payment.
If you are taking out a mortgage, there are a few things to know. First, knowing the difference between conforming and non-conforming loan programs can be helpful. Conforming loans tend to be less expensive, but you can borrow more with a non-conforming loan. Shopping around will ensure that you find the best loan for your needs. Your credit also plays a big role in what you qualify for; non-conforming loan programs have stricter credit requirements that conforming loans.
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