Real estate with Chris Vigil: Know the ins and outs of home loans

Buying a home can be a fun and exciting experience. But finding the right home is just one step in the process. Many young couples are excited about the prospect of finally owning their own home. Some no longer want to rent, some want to move out of their parents’ home. But whatever the motivation, choosing the right home is just one step in the process. The right home loan can be just as important. Here are some tips to help make finding the right home loan as easy as possible.

Depending on your lender and the type of loan you choose, your required down payment can range anywhere from 3.5 percent to 20 percent of the purchase price of the home. All FHA (Federal Housing Administration) processed loans always come with M.I., or mortgage insurance. Prior to the market meltdown of a few years ago, mortgage insurance was something that usually went away after the home has increased in value with equity of at least 20 percent. That is why many conventional loans which typically require a 20 percent down payment forgo mortgage insurance, saving the borrower thousands of dollars over the life of the loan.

Once you have established what your down payment is going to be and you have started getting that money together if you have not already, you need to consider your credit score. A good credit score puts the buyer in position to attract the best deal on a home loan. Its a very good idea to obtain a copy of your credit report from your lender before starting the home buying process. You will see what your credit profile looks like to potential lenders and can then take steps to improve your credit score if necessary.

To get an idea of what your monthly mortgage payments are going to be you can Google mortgage calculators and use any one of the number of free ones online. They are a great tool for helping you understand how much home you can afford. They are very easy to use and can show you how much your monthly mortgage payment would be under different home price, down payment and interest rate scenarios.

Like any product or service where we have a choice one must realize that all mortgages are not created equal. Even if loans have the same interest rate, there could be differences in the points and fees that make one offer more expensive than another. It’s important to understand all of the components that go into determining the price of your mortgage, so you can accurately compare the offers being made.

Most if not all real estate agents want you to be pre-qualified for a loan before they will start to work with you. This helps two-fold. One, you are not wasting the agents time, two, you are not wasting your time. Nothing is more heartbreaking than looking at homes in a price range or neighborhood that you cannot afford. Once you are pre-qualified, you will have a better sense of how much you can borrow and the price range of the homes you can afford and be better able to react to hot market deals, which don’t last long in this real estate market.

Chris Vigil is the broker/owner of Chris Vigil Real Estate in Whittier. He can be reached at www.ChrisVigil.net or at 562-945-4422.

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