A mortgage is a loan that’s used to buy or refinance a home. It’s a form of debt that requires you to pay interest on the amount you borrow, as well as taxes and insurance, which can be added to your monthly payments.
Before you apply for a mortgage, review your credit score and debt-to-income ratio to determine how much house you can afford. This will help you avoid a situation where you spend more than you can afford on mortgage payments and other expenses, which can impact your lifestyle.
Assets: Your assets are an important part of your financial picture and can affect the type of mortgage you’re approved for. They include liquid assets, such as savings and checking accounts, as well as non-liquid assets, such as investments or a car.
Debt-to-income ratio: Your debt-to-income ratio, or DTI, is one of the most important factors lenders consider when determining your eligibility for a mortgage. Your DTI is the total of your mortgage payment and any other debt payments, such as student loans or credit cards, divided by your gross monthly income.
Your credit score: The better your credit is, the lower your mortgage rate will be. Before you apply for a mortgage, check your credit report to make sure it is clean and free from any inaccurate information that could lower your credit score.
Loan type: There are many different types of mortgages available, including fixed-rate, adjustable-rate and hybrid. Choose the best type of mortgage for your situation and budget.
Down payment: The size of your down payment will influence the mortgage rates you’re offered, as well as how much money you need to put down on your house. Putting a significant down payment will also give you more equity in your home, which means you’ll have more money to invest and save for your future.
Mortgage term: The length of the loan you choose will be a key factor in determining your monthly payments. Most mortgages have terms of 30 years, but you can choose a shorter or longer period. Stretching your mortgage out over a longer time period can reduce your monthly payment, but it can also increase the amount you’ll end up paying in interest.
Recurring costs: Most recurring costs, such as property taxes, HOA fees and insurance, persist for the life of your mortgage. These costs increase with inflation, so it’s crucial to estimate how much you will have to pay for these items over the course of your mortgage.
You can use our mortgage calculator to calculate your upcoming mortgage payments. Simply enter the date your mortgage will start, the amount you’re borrowing and the interest rate you’ve been quoted to get an idea of what your monthly payments will be.
Other factors:
A mortgage is an excellent way to finance the purchase of your first home or your next dream home. But it’s a big commitment that’s why it’s so important to shop around and understand your options.
