Everyone’s financial situation and homeownership goals are unique. That’s why it’s smart to consult with a mortgage professional who takes the time to understand your needs and helps match you with a mortgage product that aligns with your circumstances and future plans.
With a fixed-rate mortgage, your interest rate and monthly principal and interest payments remain the same for the life of the loan. This type of mortgage is ideal if you plan to stay in your home long-term and prefer predictable payments.
An ARM typically offers a lower initial interest rate for a set period, ranging from 6 months to 10 years. After that, the rate adjusts annually based on a specified index. An ARM may be a good option if you expect interest rates to drop or if you plan to sell before the adjustment period begins.
This involves taking out a first and second mortgage simultaneously, such as an 80-10-10 (80% first mortgage, 10% second, and 10% down payment) or 80-15-5 (80% first, 15% second, 5% down). Combination loans may help you avoid the costs of private mortgage insurance (PMI).
Your monthly mortgage payment typically includes four components, often referred to as PITI:
Before you start looking at homes, take time to evaluate what you can realistically afford. Doing so can help you avoid falling in love with homes outside your price range and save time during the loan approval process.
A common guideline suggests you can afford a home that costs up to three times your total (gross) annual income. However, it’s essential to evaluate your budget and lifestyle. Consider mortgage payments, taxes, insurance, utilities, maintenance, potential renovations, and more.
Lenders often recommend that your total monthly debt payments — including your mortgage — should be between 28% and 44% of your gross monthly income. For example, if you earn $2,000 per month, your total debt obligations shouldn’t exceed $880 (.44 x $2,000).
A higher credit score can open the door to better loan options, lower interest rates, and potentially a smaller required down payment.
Your Payment History has a 35% impact. Paying on time has the most significant impact. Late payments, collections, or charge-offs can negatively affect your score.
Studies show that approximately 79% of credit reports contain errors, and 25% of these mistakes could be severe enough to affect your ability to qualify for a loan. That’s why reviewing your credit report for accuracy is crucial before applying.