Whether you’re seeking your first home or refinancing your existing mortgage loan, the tax landscape for 2018 will bring some changes for homeowners that should give them pause. Despite the passage of a new tax bill late last year, mortgage applications rose sharply in the early moments of 2018, demonstrating a continued and even renewed interest in homeownership across the country.
You May Qualify for a Lesser Down Payment Mortgage Loan
First-time homebuyers often think they need to have at least 20% of the loan’s value in their savings just to secure a mortgage loan, but many lenders dispel this idea. For qualified borrowers, there are plenty of mortgage loan options and programs allowing them to secure funding for the purchase of their home with a lesser payment. Programs, such as FHA loans, allow you to provide a smaller down payment.
Those with Imperfect Credit Can Secure Other Loan Options
One of those options is insured by the Federal Housing Administration, FHA loans are incredibly attractive to many aspiring homeowners simply because they don’t require perfect credit. In 2016, the average credit score for an FHA homebuyer was about 680 for example.
Refinancing to a Shorter Term Loan Can Save You Big
While some market analysts expect mortgage rates to increase in 2018, current homeowners should still investigate refinancing the terms of their loan. In order to secure that built-up equity in your home and perhaps finance a remodel or home improvement project, a mortgage loan refinance can be a huge help. Additionally, you can save money in the long-term if you refinance into shorter term loan.
Be Wary of Alternative Mortgage Lenders
As we’ve covered previously, the influx of so-called “alternative mortgage lenders” has shaken up the mortgage lending world, but we’re skeptical. Because these lenders aren’t FDIC-insured, the risks of taking a potentially lower rate loan over what you’d find at a bank or traditional lender may be too bitter a pill to swallow.
Shop Around for Rates and Fees
Mortgage lenders rarely advertise their interest rates and fees, so you’ll need to speak with a few potential lenders to compare your options and ensure you get the best rate available. They’ll all have their own specific terms, so carefully comparing different mortgage loan offers will be a significant part of your house hunting experience.
Make Yourself as Attractive as Possible
Despite the lower barriers to entry required to secure a home mortgage loan, you should try and make yourself as attractive as possible to potential lenders. While you can certainly get approved for a mortgage loan with a lower credit score or imperfect credit history, the benefits of improving that score, adding a bit more to your down payment coffers, and waiting for the right home to come along rather than jump at the first opportunity will go a long way in the eyes of a potential lender. And to follow up on the previous section, getting pre-approved and pre-qualified for a mortgage loan can help dramatically in the home buying process.
Avoid the PMI Rate
Most mortgages come with a built-in interest fee known as Private Mortgage Insurance should you fail to provide the 20% down payment. It is a blip on the map on your monthly payments, but there is a comfort in knowing you’ll pay less over the life of the loan – and potentially improve your interest rate with a higher down payment at the outset.
To learn more about your potential home buying journey and to see how partnering with a local lender can be beneficial to your future, contact Bank of Bozeman today or come by during the week to discuss your viability as a borrower with a mortgage loan professional.