If you’re considering applying for a mortgage, you may need to analyze your current financial situation to conclude just how much home you can afford. There are plenty of ways to see how your debt situation and credit score can align with your ability to get the best possible mortgage for yourself.
Here are a few facts to help you understand the benefits, drawbacks and loopholes of the mortgage process.
“Predatory Loans” Happen
When you’re applying for a mortgage loan, you need to look out for scams - or, in this case, “predatory loans.” These dishonest lenders will try to exploit you by engaging in activities such as selling properties for much more than their worth and knowingly lending you more money than you can afford to pay monthly.
You Can Issue A Mortgage That Also Repairs Your Home
According to the FHA’s Section 203k insurance program, single-family homebuyers and homeowners are able to cover both the acquisition and rehabilitation of a property on a single, long-term, fixed or adjustable rate. This helps homeowners save a good deal of money by maintaining the home utilizing a small, monthly fee rather than multiple large investments every time the house experiences damage.
You’re Allowed To Refinance Your Mortgage
“Refinancing” a mortgage means that you can pay off your existing mortgage and take out a new one using new terms, which costs less money than making a new mortgage. This can come up if interest rates lowered or you want to change the type of the mortgage you currently have.
The Higher The Credit Score, The Lower The Interest Rate
Lenders use your credit score to measure how reliable you’ll be with paying your mortgage. Therefore, the better your score, the more likely the lender will award you with a lower interest rate. Try out the Consumer Financial Protection Bureau Interest Rates Tool or check your credit score on apps like CreditWise from Capital One (NYSE: COF) to help you see where you stand and which rates will be available to you.
Student Loans Can Be Excluded From Your Debt Ratio
If your student loans are deferred for the time being, they're able to be excluded from your debt ratio. A deferment allows you to either stop or reduce making your student loan payments temporarily. So, if you have student loan debt and worry about that debt impeding on your credit score, don’t worry. There are ways to defer your payments so you are able to get the best possible mortgage interest rates for you.
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