Buying a home in Philadelphia is one of the biggest purchases you’ll make. Before you shop around the market for your new house, it’s best to have a clear idea about mortgages.
First, let’s define what a mortgage is. A mortgage is a loan you apply for when buying a property. You can think of it as a means to own a house without having to pay the whole selling price upfront. Since you’re not paying the full price, mortgages allow you to make repayments over time. Most mortgages last up to 30 years, but this period can be shorter or longer depending on the type of mortgage you sign up for. After repaying your whole loan, that is when you can truly say that you own your house free and clear.
How do you apply for a mortgage?
There are many ways to sign up for a mortgage. You can either apply with a bank or a mortgage company. Once you have chosen, your lender will inquire about the type of mortgage you want and how long you prefer it to be.
Different lenders have their own set of requirements before they approve your application. This could include documents about your identification, income, assets, and liabilities. Lenders ask for this data as proof that you’re able to make repayments in case the interest rate goes up.
How do you get approved for a mortgage?
Aside from paperwork, you will also need to factor in your credit score. Your credit score gives the lender an overview of your spending habits. A high score translates the ability to make repayments while a low score does not. You need a score of over 600 to get approved for a mortgage. Check your credit score to know your current status. If you have a low score, you can slowly raise it by paying your bills on time and lowering your debt.
Another thing to consider when applying for a mortgage is your down payment deposit. The minimum down payment varies per lender, but on average, you will need to make a 3.5% deposit. The higher down payment you make, the lesser your mortgage loan will be in the long run.
What happens after your mortgage application is approved?
Your lender will give you a binding offer and documents which explain the terms of your mortgage. You will also get a seven-day reflection period to think about and review the implications of your lender’s offer.
Unless you’re experienced in buying property, it would be wise to work with an expert. The Ranieri Team can process your mortgage loan for you so you can move to your new home in no time.
What happens if you can’t pay your mortgage?
Your property gets foreclosed. If you can’t make payments in time, your lender will foreclose your property to settle the rest of your loan. This means that you will be evicted and your house will be put on sale. You can prevent missing mortgage payments by being aware of what you can and can’t afford. Pick out a mortgage plan that fits in with your budget so you don’t have to struggle in the future. Learning about how do mortgages work now will save you from a whole lot of trouble later on.
Still have questions on how mortgages work? Contact us and we will be happy happy to answer any questions you may have!