The 3 Biggest Questions You Should Ask Before Taking Out A Mortgage

“To qualify for a mortgage, good credit is essential,” writes Justin Pritchard of thebalance.com. In order to provide you with a mortgage, he explains, “The bank risks a lot of money, and they have been increasingly cautious since the subprime mortgage debacle.”

For this reason, it’s crucial to know your credit score and, if necessary, strengthen it before making major financial moves. A poor credit score could prevent you from qualifying for a mortgage or, if you can qualify for a mortgage, lead to drastically increased interest rates.

U.S. News’ Teresa Mears adds it’s best to develop good credit habits as early as possible: “Missing payments on student loans or habitually paying your bills late will lower your credit score and make borrowing for a home impossible or more expensive. Once a bill goes into collections, it can take months or years to recover from the damage.”

Before agreeing to any mortgage, run your own calculations to figure out what your monthly mortgage payments will be and if this will fit with what you can afford. Understanding your debt to income ratio is a good way to know if a house will be affordable for you.

First-time homebuyers in particular may qualify for special mortgages, some of which may be very valuable. These special mortgages are designed to help qualified buyers become homeowners, and may include benefits like:

• Lower (or no) down payments
• Cancelation of some of the mortgage debt (typically over a long-term period)
• Subsidized interest rates for lower monthly payments
• Decreased fees
• Grants which can be applied towards various costs or remodeling
• Deferred payments

Evidently, these mortgages can be very helpful to new homebuyers, especially those who meet certain financial requirements.