So, you have decided to get your dream home. It might be because you want to start your own family, move out of your childhood home, or have a personal space solely for you. Whichever the case is, at this moment, you might feel overwhelmed with how to start. Getting a mortgage is one of the integral first steps in buying a new home.
What is a Mortgage?
A mortgage is an agreement between you as a borrower and a mortgage lender where the latter agrees to refinance a home you wish to purchase without having to lay down cash upfront. Lenders may repossess the property subject to the agreement if you fail to make good on the terms in the contract as the debtor. This commonly happens by not paying the money when it becomes due and demandable.
How does a Mortgage Loan Work?
When you, as a borrower, contract a mortgage loan with a lender, you are expected to repay the amount loaned plus interest over the specified years agreed. Traditional mortgages are usually full-amortizing, meaning the amount for payment will stay the same, but over the lifetime of the loan agreement, you will pay different proportions of interest.
Mortgage terms are likely to run for 15 to 30 years. Experts say the best time to get a mortgage coincides with the times of the year when home prices are at their lowest: in late fall and early winter. With this, a lower mortgage rate is more likely to be agreed on compared to other times in the year.
Where Can You Get a Mortgage?
Credit unions, national banks, mortgage intermediaries, and online lenders are the go-to mortgage lenders. Let’s take a look at each option.
Credit Unions and Community Banks
Community banks, by far, are the safest choice. These entities have a more personal touch with the community, and bankers need the people in the community as customers more than they need the bank. Hence, community bankers give more leeway regarding credit scores, which play a crucial part in whether they would grant a mortgage loan to you or not.
These entities call the most shots regarding mortgage loans for a reason. Banks are corporate bodies that already have set their reputation as to loan programs and having competent people who are well-trained to screen trustworthy and responsible borrowers. As they have established themselves as a formidable entity, customers might be a number to them.
Hence, acquiring a mortgage loan from any national bank may be a little more demanding, and a rigorous application needs to be undergone to present that you are a qualified debtor. Moreover, although national banks are presumed to be imbued with the public interest, they may favor persons with more significant accounts more favorably. Thus, if you as a borrower have only little to show, they may take their time to address your needs and concerns.
Mortgage brokers serve as intermediaries to help you choose the best direct lender for your mortgage loan application. They act as a middleman to connect you to the direct lender that best compliments you.
Although mortgage brokers may sound good on paper, it is not an assurance that they may immediately attend to your mortgage loan needs or queries. Mortgage brokers are connected regularly with other lenders and may be looking more at deals that would benefit them than you, who is the initial proponent of the mortgage loan.
In the advent of the pandemic, which forced most if not all people to stay in their homes and protect themselves and their loved ones, online lenders are the best viable choices. Online lending has altogether eliminated face-to-face contact. However, one good thing about online lending is the quick application and review process for mortgage loan applications.
Becoming a homeowner is challenging and sometimes frustrating. However, you cannot also deny that the experience is worth it. What is important is you take the steps and time to familiarize yourself with what mortgage is all about before dipping your feet in the market.