There are 3 Questions You Need to Ask Before You Sign on the Dotted Line
Buying a new home can be an exciting adventure. But it can also oftentimes require you to take on a large amount of debt by way of a mortgage. In fact, for many people, a home is the biggest purchase they will ever make. So, it is important that you understand exactly how much it will cost you.
With that in mind, there are three key questions that you must ask your mortgage lender before you make a long-term commitment:
- How much home can I really afford?
First and foremost, you should know how much home you can afford before you apply for a mortgage. Otherwise, you could end up spending countless hours searching for a home that you won’t be able to purchase. In order to narrow down the amount, the lender will look at several factors, including your income and assets, as well as your credit score.
- How much will my closing costs be? It actually costs money to borrow money – and when it comes to a home mortgage, the “price” can go beyond just the interest rate on the loan. There is actually a long list of expenses you may need to pay when you purchase a home, including a loan origination fee, an appraisal fee, attorney fees, and title insurance. These costs can typically be factored into the total amount that you borrow. If this is the case, though, it can impact your monthly payment amount.
- Should I go with a fixed or an adjustable rate mortgage? There are both fixed rate and adjustable rate mortgages – and both types can have a few pros and cons. For instance, a fixed rate mortgage will lock you in to the same rate for the life of the loan. So, if interest rates go up, you won’t have to worry about your payment also increasing. On the other hand, if rates go down, your monthly payment will also stay the same! With an adjustable rate mortgage, you could find that your payment moves up and down throughout the life of the loan.