We all want a better life for us and our family. However, most life upgrades cost money, and you can’t always just pull out a couple hundred thousand dollars to get something you need. This is where a mortgage comes in. A mortgage is a special type of loan that you can take out to buy a piece of property, and you pay it back in installments over the years. The catch? If you fail to make a payment, the mortgage company can repossess your property and sell it to get their money back. So, mortgages are definitely an option for some, but there are a couple of things you need to be aware of before applying for one. Before we start, it’s also important to understand other types of mortgages, like a reverse mortgage in Nevada, or in any other state.
Do You Have Outstanding Loans?
The first thing the mortgage company will look at is your outstanding loans. Do you have any other loans that you’re still repaying, or have you perhaps been late or asked for extensions for loans in the past? If you live in a partnership, they might also check out your partner to make sure they don’t have any outstanding loans, especially if you have a combined or shared account. This is their way of guaranteeing you’ll actually be able to pay off the loan.
How Much is the Down payment?
Nobody will just hand you a bunch of money to buy a house. You’ll need to put a downpayment to cover a part of the cost, and then the rest is covered by a mortgage. This sum is usually 20%, which can be a lot of money to have at once. However, it always works out favorably, as with a 20% downpayment, you don’t have to get mortgage insurance, which will add up to thousands of dollars over the years. After all, buying a home isn’t a small deal, and you’ll want to save up and think it over for some time before you commit.
How Do I Know If I’m Eligible?
A lot of people are unsure whether they can even apply for a mortgage, and if they can, how much they can borrow. It’s a common question and the answer boils down to two things: your credit score and the type of mortgage you’re applying for. Let’s start with your score: the most important thing they will look at is your employment status, both past and present, and your spending habits. Before applying for a mortgage, you’ll want to make sure you don’t have any credit card debt and that you’re paying your cards off in full every month. As far as your employment goes, you’ll want to be at your current workplace for at least a year to have a strong chance, especially if you’ve been bouncing between multiple jobs before that.
Other Expenses
You might be calculating how you’ll repay the mortgage by just subtracting your monthly expenses from your salary and seeing what you have left, but it’s important to remember that other expenses will happen throughout your life and that can’t be put on hold like if your car breaks down, you have a medical expense or the kids need new things for school. You need to leave plenty of wiggle room so that you don’t end up fearing losing the roof over your head month after month.
Sort Out Your Taxes
When you apply for a mortgage loan, they’ll want to see your federal tax records for the past two years. You’ll want to have all of this sorted and in order, so you can deliver when demanded. If there’s anything that looks shady at those papers, you’ll probably get denied, so you might want to look over them one more time even if you’ve been keeping track.
It’s Not Over Until You Get the Check
Even if you get approved for the loan, the company will still monitor your purchases leading up to signing the check, so you’ll want to refrain from making any big, impulsive, or uncommon purchases that might raise red flags. Just keep your wallet closed for a few weeks, you’ll thank yourself later.
Applying for a mortgage is a big life decision that can very easily shape your future for the next few decades, dictating whether you can change your job or move. So make sure that you think several times before committing to it and putting everything on the line. On the flip side, getting approved for the loan and getting the home you’ve been dreaming can be the biggest and best step you take for your future, so just make sure you’re considering all angles and do what’s best for you.
