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Mortgage Tips and Advice
Buying a house is a big decision—especially when you consider how much a typical mortgage is. Mortgage debt is the largest form of debt in this country. In fact, the average consumer has a mortgage debt of over $150,000. If you’re in the market for a new home, be sure to read these mortgage tips first.
Check Your Credit Score
Before you do start looking for a home, it’s important that you know your credit score. You’re entitled to one free credit report per year from each of the three credit reporting bureaus (Experian, Equifax and TransUnion). Knowing your credit score will help you get a better idea of the rates and terms you’ll likely be offered. Plus it helps to know where your credit stands.
Once you know your credit score, you can start the approval process. Getting pre-approved for a mortgage loan will make it easier for you to make an offer, since sellers are generally quicker to accept offers from pre-approved buyers.
Choose the Right Plan
The difference between a bad mortgage and a perfect one isn’t necessarily the house; it’s choosing the right type of mortgage plan. Under a fixed-rate mortgage, your interest will remain the same throughout your loan. The simplicity and safety of a fixed rate makes this the most popular mortgage type. Typically, fixed-rate mortgage plans come in 15-, 20- or 30-year terms. Other mortgage types include adjustable-rate, nontraditional and special financing (visit Home Buying 101 for more mortgage facts).
Consider Your End Goals
In order to help decide which type of home and mortgage is best for you, it’s important to consider how long you plan on staying.
- Is this your first house? If so, chances are you’ll be allocating a decent amount of your monthly paycheck on your mortgage payment. Choosing longer loan terms may lessen how much you owe each month, but you’ll end up paying more in interest over time.
- How long are you planning to stay? If you’re planning on staying for at least a few years, longer terms may be in your best interest. On the other hand, if you know you’ll be moving in a few years, shorter loan types may be more beneficial.
- Are you planning to rent your home out? Choosing shorter terms will help pay your home off quicker, which may come in handy if you’re in the market to sell.
All are important questions to ask before you start looking for homes. This way you’ll have a better idea of how much you should be paying. By knowing these common mortgage facts, you’ll be better informed when it comes time to decide a payment type.
For more mortgage advice, also see: