If you’re in the market for a new home in Salt Lake City, you may be wondering, how does a mortgage work?
Before taking such a big financial step, it’s important to understand the ins and outs of mortgages.
What Is a Mortgage?
A mortgage is an agreement between you and your lender that allows you to use part or all of their funds to buy a house. Once your lender gives you the money, they make sure that you have enough to actually buy the home. They ask you questions to make sure you have enough to make your mortgage payment and that you don’t have any unexpected expenses that could make that impossible.
Types of Plans
There are several kinds of mortgages you can get depending on your goals. First, there are FHA loans. These loans have a lower interest rate and are backed by the U.S. Department of Housing and Urban Development (HUD). While FHA loans require some paperwork, they are more secure than other mortgages. You can also get a conventional mortgage which requires less paperwork and can be made for up to 96% of a home’s value. However, conventional mortgages are more expensive and require a larger down payment. If you are in a position where you want to pay less for a home than the home’s value, a USDA or VA loan might be a good option for you.
When you qualify for a mortgage, you’re considered lower risk and lenders will be more likely to lend to you. For example, let’s say that a lender is willing to lend $300,000, and you’re applying for a loan of $325,000. To get approved for $325,000, your debt-to-income ratio must be under 36%, or else your lender will say “no” to your request. Next, lenders are generally interested in your credit score. It’s easy to get a free credit report and track your credit score. The more you pay on your credit card or use your credit cards for big purchases, the higher your credit score is. Your credit score is also determined by your credit score history and payment history.
How Much Can You Afford?
When deciding on a mortgage for your new home, you’ll need to answer the question: how much money can you afford to put down? You’ll need to calculate this amount and your bank will tell you what your maximum amount of mortgage you can take on is. It’s important to keep in mind that a $300,000 mortgage may be harder to qualify for than a $200,000 mortgage. The amount you can afford depends on your monthly income, and other variables.
Contact Utah Sell Now Today
If you’re looking to sell your home and pay off your mortgage fast, contact the experts at Utah Sell Now today. We buy homes in the Salt Lake City, Utah, area in any condition fast and in cash so you don’t have to go through the hassle of staging and showing your home, or paying a realtor. Call us today for your no-obligation written offer and you could have money in hand for your home in as little as seven days.