7 Mistakes to Avoid as a First-Time Home Buyer

First-time buyers are often a bit overwhelmed at the thought of buying a house.

The intention of this article is to help prepare you for what NOT to do when buying a house for the first time, and you’ll pick up some great information along the way.

Without further ado, let’s dive in…

1. Not educating yourself on the buying process


One of the best tips we can give to anyone who’s buying a house for the first time is to educate yourself on the steps involved when buying a house. Too many first-time home buyers are jumping into the housing market because it ‘feels’ right and this is a mistake. How can you know what feels right when you’ve never done it before?

Instead of buying a house based on feelings, you need to buy a house based on facts. Before committing to buy a home, you need to make sure that you’re ready to buy your first house.

Do you know what first time home buyer programs are available in your area? First-time home buyers have a number of benefits available to them that offer big time savings.

Find a top local Realtor in your area and ask them specifically to chat with other first time home buyers they’ve worked with in the past. Don’t hesitate to gather information on the experiences of others who have worked with them.

2. Not preparing to buy a house

Time to start saving. Once you think you have enough money saved, you are going to pay for the inspectors, the attorney, the appraiser, etc.

Not preparing properly is a common buyer mistake, especially one among first-time buyers who have never purchased a house before.

If you’re buying a house for yourself then you should have no problem putting together a list of your priorities. Those who are buying with a significant other will have to strategically prioritize what matters most to both people who will be living in the house. Those buying with the intentions of starting a family will have different priorities.

Knowing your priorities ahead of time is going to make for a much easier home search. The location should be priority #1 when buying a house – you can change the condition of a house, you can’t change the location (or the school district).

3. Finding the house before the location

A lot of time first time home buyers will wait to find the perfect house that will never hit the market. There are some things buyers MUST be willing to sacrifice in order to find a great home at a great price in an excellent location. If there is one thing a home buyer should never settle on, it’s location.

Buying a big house in a bad location is a common first-time buyer mistake. You should buy a house based on the priorities you have in a location, and narrow down your criteria before you start previewing homes.

One common mistake a first time home buyer will make is failing to buy a house in the location they want because they are ‘tempted’ to buy a mansion in a location that is less desirable. Once you start previewing homes outside of your desired area you’ll confuse yourself. For instance, someone with a budget of $300,000 will be able to buy a much bigger house in Durham, NC than they would if they bought a home in Cary, NC. The difference here is schools, amenities, safety, commute time and more.

4. Overextending on your budget

One of the worst mistakes a first-time buyer can make is overextending on your budget. Your home instantly becomes a burden instead of something you can enjoy. One of the best things you can do as a homebuyer is reverse-engineer your monthly costs before you buy a house.

If you can spend 3-6 months calculating an average cost to live, you can set budgets for how much you’re comfortable spending and saving. Whatever is left over is a comfortable monthly payment on a house (don’t forget about mortgage insurance).

For those purchasing a home with less than a 20% down payment, private mortgage insurance is likely to be included as a requirement in owning your home. Private mortgage insurance will typically go away once you have paid back 20% of the loan.

 5. Not having the right real estate team in place

Your real estate team is like a group of coaches for first-time home buyers. Everyone makes mistakes, it’s human nature. It’s your real estate team’s job to make sure they coach you through the mistakes proactively.

As a first time home buyer, it’s important you assemble the right real estate team. You’ll want to ensure you have the right mortgage lender, real estate agent, home inspector, and attorney.

Having the right real estate team in place will go a long way in your home purchase as they will be able to guide you throughout the process. Make sure you find a team that works well with you and works well together to ensure a smooth home buying experience!

6. Buying based on emotion

The best decisions you can make when buying a home are the ones based on facts. Too often I watch a buyer make an offer on a home they love only to be outbid by another offer. Hearing that the home sold to someone else is not easy. It’s one of the toughest things you can hear as a buyer, especially if it’s your first time.

Becoming depressed as a buyer is a common mistake first-timers make.

When you allow yourself to become depressed your body does two things typically. One, it shuts down completely and it no longer wants to buy a house because there was too much ‘pain’ experienced. Or two, you will buy anything just to feel better about missing out on the last home.

These are commons mistakes made by all sorts of buyers, not just first-time buyers.

If you make an offer and the home sells to someone else then treat it like a GOOD thing. You just picked out one of the most desirable homes on the market, meaning you recognize a good deal! Pat yourself on the back, and go find a better one!

7. Not calculating the true costs

Are you ready for all of the costs that come with buying your first house, and all the costs that come with homeownership? There is going to be a wake-up call for first-time home buyers who are looking at just their principal and interest monthly payments. There are many more costs that come with both purchasing a home and owning a home.

Looking at ‘what you can afford’ when buying a home is a common first-time buyer mistake.

What you can afford, and what you can afford while maintaining your current lifestyle are two entirely different numbers.

Some of the recurring costs you’ll want to be sure you include when buying a house are:

    Property Taxes
    Mortgage Insurance (If you put less than 20% down)
    Home Maintenance
    Homeowner’s Insurance
    Utility Bills

Final thoughts on mistakes made by first-time buyers:


It is imperative to factor loan origination fees, attorney fees, inspection fees, appraisal fees, mortgage insurance, and any other closing costs into your budget when buying a home. It is your job as a buyer to make sure you factor all the costs involved when purchasing a home. Your Total Mortgage loan officer or your realtor will be critical in helping you understand which fees apply to you, how much those fees will be, and what your options are.

I cannot stress to my buyers enough is that location is the most important part of a home. You can change the price, you can change conditions–you cannot change the location.

If you can avoid making these 7 mistakes when purchasing your first house, you are going to be in much better shape than most of the second and third-time home buyers out there!

source: totalmortgage.com

5 Ways to Pay off a Mortgage Loan Early

Although it can take up to 30 years to pay off a mortgage, there’s no rule that says you have to spread this debt over three decades.

An “estimated 20 million Americans own their homes outright,” reports Dave Ramsey, author of the best-selling book The Total Money Makeover. And if you’re looking to join this club sooner rather than later, adjusting the way you pay your mortgage can get rid of the loan quicker.

Now, this achievement may appear to be a far-off dream, but there are practical ways to make it happen.

1. Submit Bi-Weekly Mortgage Payments

Paying one-half of your mortgage payment every two weeks can shrink your term by six or seven years. Given how there are 52 weeks in a year, bi-weekly payments result in 26 half payments – the equivalent of 13 full payments or one extra mortgage payment a year.

Although a seemingly insignificant move, this extra mortgage payment decreases the amount of interest you owe over the life of the loan and ultimately shortens the length of your mortgage term.

Unfortunately, a bi-weekly schedule isn’t something you can do on your own. You’ll need to get permission from your lender to switch to a bi-weekly payment schedule, and most banks charge a one-time setup fee.

2. Make Higher Monthly Mortgage Payments 


A bi-weekly mortgage is an effortless way to pay down a mortgage faster, but not all banks offer this option. If your lender doesn’t allow this pay schedule, you can still pay off your mortgage early by sending one extra principal payment a year.

There are different approaches for submitting the extra payment. You can make a double mortgage payment once a year, and specify on the payment coupon that you want the extra amount credited to the principal only.

Another option is increasing each mortgage payment by 1/12, which might be more manageable than a double mortgage payment. Simply divide your regular payment by 12 months and then add this extra amount to each future payment.

For example, if you’re scheduled to pay $1,400 a month, increasing each payment by $117 results in one extra mortgage payment a year.

 3. Refinance Your Mortgage

If you’re only a few years into a 30-year mortgage term, refinancing to a 10 or 15-year mortgage is another strategy for paying off a home sooner. Shorter terms increase how much you pay on a monthly basis, but the increase may not be as high as you think.

Some people mistakenly assume that cutting a mortgage term in half will double their mortgage payments. However, shorter repayment periods typically justify a cheaper interest rate, and this lower rate can translate into surprising savings.

To illustrate: a $200,000 mortgage for 30 years with an interest rate of 4.25% comes to $983 a month, excluding taxes and insurance.

If you take the same mortgage and reduce the term to 15 years, you might qualify for an interest rate of 3.29%. Based on the second scenario, you’re looking at a mortgage payment of $1,409 – a difference of just $426 a month.

4. Reduce Your PMI

If you are homeowner who did not put down at least 20% as your down payment, you will have to pay what is called private mortgage insurance, or what is commonly referred to as PMI. PMI is added to your monthly mortgage payment until you get to 20% equity.

If you have to pay PMI, considering to make more than the monthly payment would be a good idea as the extra amount would go towards the principal, thus bringing the loan amount down and equity up quicker.

By doing this, you will pay off the PMI much faster than if you just made the minimum payment, which will save you money in the long run.

5. Switch to a Shorter Loan

Today, many homeowners have a 30-year fixed mortgage loan. One way to possibly help pay down your loan quicker is by switching to a 15-year mortgage.

If you can afford to make a higher payment, then this would be a great alternative as you would save years of interest compared to a 30-year loan.

One of the benefits of a 15-year fixed mortgage is that the interest rate is a noticeable amount lower than that of a 30-year fixed.

More often than not, if you are a homeowner who plans on paying off their mortgage early, it might be a good idea to consider a 15-year loan over a 30-year loan depending on your current financial situation.

Bottom Line

How you spend your disposable income is entirely up to you. And while you can probably think of a million other uses for the extra income, paying off your mortgage early has one undeniable, priceless benefit – peace of mind from knowing that you own the property free and clear.

source: totalmortgage.com

Is a Second Mortgage a Good Idea?

To many home buyers the idea of taking out two mortgages on the same house sounds frightening. However, a second mortgage—also known as a second trust junior lien—makes good sense in the right circumstances and can actually save you money.

A second mortgage is simply a loan secured against your property as collateral. The term “second” indicates that the loan does not have priority on your home in case you default. Should that happen, your first mortgage has priority and that loan would be paid off before any funds go towards the second mortgage.

As a result, second mortgages come with higher interest rates than first mortgages. Second loans require fees and closing costs, just like first mortgages. You may also be required to pay points (one point is equal to one percent of the loan value) which could make the loan less attractive. You’ll need a good credit score and documentation for enough income to make the payments.

Three popular ways buyers and homeowners save money with second mortgages:

Avoiding private mortgage insurance. Buyers lacking a large down payment can use a second mortgage to qualify for their first mortgage without having to pay expensive private mortgage insurance.

Staying within GSE loan limits. With prices rising in the nation’s more expensive markets, buyers can buy a home that exceeds the limits for a loan to be bought by Fannie Mae, Freddie Mac or Ginnie Mae without incurring the higher interest rates of a jumbo loan. That translates into a significantly lower rate of interest on the primary loan.

Consolidating high interest consumer debt. Some homeowners pay off high interest short term debt like credit cards with lower interest, long term debt through a second mortgage.

Additionally, taxpayers in higher tax brackets get to deduct the interest they pay on both mortgages on their federal and state returns.


However, second mortgages have their risks:

• By taking out a second mortgage, you are adding to your overall debt burden. Anytime you add on to your overall debt burden, you make yourself more vulnerable in case you then experience financial difficulties that affect your ability to repay your debts.
• If you cannot repay, you could potentially lose your home because you are using the equity in your home as collateral.
• If you are consolidating debt, it’s not wise to substitute short term debt for long term debt if you end up paying more over the life of the second mortgage.

 source: totalmortgage.com

What is a Piggyback Mortgage?

While mortgages are a good time, private mortgage insurance (PMI) is not. Usually, if you don’t have enough money to make a down payment of at least 20 percent (keeping the loan-to-value ratio (LTV) under 80%), you’re required to get mortgage insurance. Fortunately, clever people figured out a loophole—the piggyback mortgage.

How it works

There are three parts to this solution, dubbed the 80-10-10 format. The first is to make a down payment of 10 percent. Step two is to get a “piggyback mortgage”, possibly in the form of a home equity loan or home equity line of credit, to cover the remaining 10 percent of the down payment. Finally, you will get a mortgage for 80 percent of the purchase price. And there you have it: 20 percent down and no mortgage insurance.


Other types of piggyback mortgages do exist, like the 80-5-15, or the 80-15-5. The middle number stands for the second mortgage and the third the down payment. These formats aren’t as common as the 80-10-10, but they are available and useful for some people.

Are there any possible problems?

Unfortunately, it’s not all rainbows and ponies with a piggyback mortgage. When it comes time to refinance, if the lender that is issuing the piggyback mortgage doesn’t agree to resubordination, you could be forced to re-evaluate your situation and call an audible.

Resubordi-huh??

It’s like this: you have two mortgages, the primary mortgage and the piggyback mortgage. Naturally, the primary mortgage is first, and the piggyback mortgage is second in line, or as they say, subordinate to the primary mortgage.

Resubordination is the process of keeping the primary mortgage in first place. Each lender will want their loan to be first in line, as that loan will have a higher priority and be paid off first, so it’s possible that the lender will not agree to remain in second place when you refinance.

This creates a problem because conventional first mortgage lenders require that their loan is in the first position in order to refinance. Usually, this isn’t a problem, as resubordination is a fairly common practice.


They won’t resubordinate! What do I do?!?!

If your second lender won’t agree to resubordination, you could get a cash-out refinance, and then use that cash to pay off the piggyback mortgage. You could also get a cash-in refinance, which would reduce your loan-to-value ratio. After you talk it out with your lenders, a solution will usually become clear.

Bottom Line

If you want to avoid paying private mortgage insurance, getting a piggyback mortgage is one way to make that happen. Just make sure you talk through the refinancing process with your lenders so you know what your options will be when that time comes.

source: totalmortgage.com

How to Get Rid of Your PMI

Private mortgage insurance (PMI) can help you buy a home without a big down payment, but it’s expensive in the long run. An online PMI calculator reveals that a $300,000 house purchased with a $10,000 down payment can stick you with an extra $277 in PMI payments each month. That adds up quickly: in five years, you’ll have shelled out an extra $16,620.

Fortunately, there are ways to save on PMI costs. Before you buy your dream home, consider your PMI exit strategy to save big in the long run.

1. Avoid an FHA

The best way to avoid paying PMI is to make a 20 percent down payment on your home so that you don’t need it at all. Failing that, you should do your best to stay away from FHAs. Because they’re intended for riskier borrowers, you end up paying PMI for the life of the loan, regardless of how much equity you’ve built.

If you’re an otherwise well-qualified borrower looking for a low down payment option, take a look at a conventional loan. Recent changes over the last year have made it possible for borrowers to put as little as 3% down, and once you have built up enough equity (generally 22% of the loan) you can cancel the PMI.

2. Make Extra Mortgage Payments

By paying extra on your mortgage each month, you’ll be increasing your equity at a faster rate than if you just paid the minimum. Any extra payment you make goes directly to paying down your principal, and you’ll save by not owing additional interest on that portion of your mortgage. Once you owe less than 78-80% of the original value of your home, you can call your bank and request they cancel the PMI charges. The sooner you can pay down your debt, the sooner you can get rid of PMI payments.

3. Re-Financing Your Mortgage

Keep an eye on the housing market in your neighborhood and on mortgage rates from other lenders. If home values have gone up since you bought your house, you may have more equity than you think. Think of it this way: if your $300,000 home is now worth $400,000, you have an extra $100,000 in equity. If the amount you owe on your mortgage comes to under 80 percent of the new appraised value, you can refinance your mortgage to get a new loan with no PMI. Just make sure your new interest rate isn’t too high and you’ll come out ahead.

With a little planning and discipline, you can take advantage of these tips to reduce or even eliminate your PMI costs. The savings can be enormous, so it pays to crunch the numbers and get focused on the goal of kissing your PMI goodbye.

source: totalmortgage.com

What is Private Mortgage Insurance?

Depending on the type of mortgage and the type of borrower, the initial down payment on a home might not be a significant percentage (less than 20%) of the total price. In situations like this, the lender knows that the borrower doesn’t have much stake in the property, which means they are at a greater risk of defaulting on their loan.

The result is that the borrower has to pay for private mortgage insurance (PMI), which usually amounts to between 0.5 and 1 percent of the loan. So if you get a mortgage for $200,000, and your mortgage insurance premium is 1 percent, you’ll pay $2,000 a year for PMI, or about $167 a month.

Paying extra on your mortgage certainly isn’t enjoyable; however, it does allow borrowers who wouldn’t be able to afford a higher down payment the ability to purchase a home. When does it end? You might be wondering. There are two ways you can get rid of private mortgage insurance.

1. Borrower-requested cancellation

 

Once you’ve attained 20 percent equity in your property, you can ask your lender to cancel PMI on your property; however, they have no obligation to do so. There are many ways to build equity faster, the simplest of which is to pay a little extra every time a mortgage payment is due.

Home improvements, if chosen wisely, are another way to get to that 80 percent loan-to-value level. The reason being that your loan will stay the same, but your home will now have a higher value. The difference between your loan and the new value is equity in your pocket. Just remember that before the lender will eliminate PMI, they’ll require a home appraisal, which costs about $300-$400.

2. Automatic termination

 

If you can’t afford extra payments, or your lender rejected your cancellation request, never fear, in a few years your private mortgage insurance will automatically terminate.

The Homeowner’s Protection Act (HOPA) makes it illegal for lenders to unnecessarily charge borrowers mortgage insurance. Typically, this means that when your mortgage balance is paid down to 78 percent of the original value, lenders will automatically end private mortgage insurance.


If PMI sounds like a headache, then start saving and make sure your down payment is greater than 20 percent. You might have to wait longer until you make a purchase, but the stress you save yourself could make it worth it.

source: totalmortgage.com

Mortgages are Getting More Affordable for First-Time Buyers

Thanks to a series of recent decisions, authorities are opening up the mortgage marketplace to more first-time and low-income homeowners.

Last month, Fannie Mae and Freddie Mac announced that they will begin backing fixed-rate mortgages with down payments as low as 3%. Then, last Thursday, the President announced a 0.5 percent cut to the mortgage insurance premiums the Federal Housing Administration requires—making the already easier-to-qualify-for FHA loan even more affordable.

This comes at a time when lawmakers are looking for ways to jumpstart a slow-moving housing recovery. The theory is that tight lending is keeping thousands of buyers out of the game, and that relaxing certain requirements could be enough to coax the market back to its pre-2006 vigor.

However, this loosening trend has also sparked worries that lax lending may lead us to another housing bust. Fannie Mae and Freddie Mac have attempted to allay fears by explaining that borrowers will still have to meet strict criteria. They must have a credit score of at least 620, buy private mortgage insurance, and receive home ownership counselling.

Meanwhile, the projections for the president’s insurance premium cuts are impressive. The White House expects these cuts to allow up to 250,000 new people to take advantage of the FHA loan program, and the FHA’s reserve fund are projected to grow by 7 to 10 billion dollars this year with the cut—vital, as the FHA has needed hefty federal bailouts in recent years.

Wondering where we stand in all this? Take a look at our interest rates.

What does all this mean for you?

 

That depends on your needs. Because these cuts are aimed at attracting new buyers, those are the same people they benefit the most.

If you’re already considering going with an FHA loan for its low down payment option, the Fannie Mae/Freddie Mac down payment cuts gives you another choice to consider. FHA loans give you the option to put as little as 3.5% down, but they require borrowers to pay private mortgage insurance for the life of the loan. The Fannie and Freddie programs, meanwhile, will allow you to cancel your insurance once the mortgage balance drops below 80% of your home’s value, saving you money.

The Fannie Mae and Freddie Mac cuts take (or took) effect December 13^th and March 23^rd, respectively, and currently apply to just fixed-rate loans.

As far as the president’s proposed mortgage insurance cuts go, they too will have the most impact for those looking at low down payment (or low credit rate) options, namely FHA loans. The White house expects the typical first-time homebuyer to save $900 a year on mortgage payments. The insurance cuts will affect buyers with FHA case numbers issued January 26^th or after, though at the moment, lenders will be allowed to cancel numbers issued before the 26^th.

If you’ve just closed an FHA, you may not be entirely out of luck. You will have to wait 210 days (or make 6 mortgage payments) before you’re eligible for a Streamline Refinance, but you will be able to get the insurance cut eventually.

Want to take advantage of these new requirements? Apply now for a personalized quote.

source: totalmortgage.com

Getting Rid of Private Mortgage Insurance

You can raise your credit score, save enough cash for closing costs, and maintain accurate financial records. However, if you don’t have at least a 20 percent down payment when buying a house, you’ll have to pay private mortgage insurance.

Private mortgage insurance is required on all mortgage loans with a loan-to-value ratio greater than 80 percent. The annual premium for PMI — which is between 0.5 percent and one percent of the loan — is added to each mortgage payment. Therefore, if you get a mortgage for $100,000, and your mortgage insurance premium is one percent, you’ll pay $1,000 a year for PMI, or about $83 a month.

For the most part, private mortgage insurance is a win-win for both parties. It protects lenders against loss if a borrower defaults on the loan; and PMI puts homeownership within reach for borrowers with less than a 20 percent down payment.

Private mortgage insurance is costly for borrowers — but fortunately, it’s not permanent. Here’s a look at two ways to get rid of private mortgage insurance.

    Borrower-requested cancellation

Since PMI is only required by lenders when a homebuyer has less than a 20 percent down payment, you can ask your lender to cancel mortgage insurance once your property has 20 percent equity — but there are no guarantees.

There are several ways to build equity faster. For example, you can submit extra mortgage payments to reduce your principal balance. There’s the option of paying one half of your mortgage payment every two weeks, which is the equivalent of one extra mortgage payment a year. You can also pay a little more each month, and apply the extra payment to the principal only.


Additionally, home improvements can quickly raise your property’s value and eliminate mortgage insurance sooner. Home improvement projects that pay off include kitchen and bathroom remodels, room additions, and exterior improvements.

To request PMI cancellation, you’ll have to submit a request in writing and follow your lender’s guidelines. If your mortgage is current and your home’s value hasn’t declined, the bank may comply with your request. However, your lender will require a home appraisal before eliminating mortgage insurance. Appraisals cost between $300-$400, depending on the size of your home.


    Automatic PMI termination

The reality is that some borrowers can’t afford to pay down their mortgages early or spend money on costly home improvements. Don’t overly stress about mortgage insurance if you fall into this category. Be patient, and in a few years, your lender will automatically terminate PMI.

The Homeowner’s Protection Act (HOPA) makes it illegal for lenders to unnecessarily charge borrowers mortgage insurance. As a rule, lenders must automatically remove PMI on the date that your “mortgage balance is scheduled to reach 78 percent of the original value of the home” based on the initial amortization schedule, says Sara Millard, senior vice president and deputy general counsel at United Guaranty Corp.
 
So, even if your lender rejects your request to cancel mortgage insurance once your property has 20 percent equity, HOPA stops PMI from becoming a permanent or long-term expense.

Bottom Line

Mortgage insurance isn’t cheap, and paying this premium every month will increase your mortgage payment. To avoid PMI, aim for a 20 percent down payment when purchasing a house. It’ll take longer to buy and you’ll have to make sacrifices, but it’s worth the effort. Besides, a 20 percent down payment not only eliminates mortgage insurance, it also helps you qualify for a better mortgage rate.

source: totalmortgage.com

How to Compare Mortgage Loan Products

There’s no such thing as a one-size-fits-all mortgage. Some products are specifically for high-end buyers, whereas other products are geared toward borrowers with not-so-perfect credit. This is why blindly choosing a mortgage product is one of the worst things you can do when buying a place.

Shopping around may be a tedious job, but it’s the only way to find the right mortgage. Sure, lenders can assist and discuss options with you. However, you shouldn’t rely solely on their advice. You need to do your homework and pick a loan product that works with your financial situation. Here are four tips to help you when comparing mortgage loan products.

1. Make Sure You Understand Different Loan Terms

You may think a 30-year mortgage term is the only option, but there’s another term available to you. Depending on how soon you want to pay off your home — and how much you can afford — a 15-year mortgage might be a better match.

Some people don’t want to worry about a house payment for three decades. They’d rather pay off the loan as soon as possible and put their money to other use, such as preparing for retirement. This is why a 15-year mortgage makes sense; but at the same time, you’re also committing to a higher mortgage payment each month. However, if money isn’t an issue, a 15-year term has additional benefits. You can build equity faster and pay less interest.

2. How Much Cash Do You Need?

Consider how much cash you have available for mortgage-related expenses when shopping for a home loan. Unless you’re getting a VA home loan or a USDA home loan, you’ll have to bring money to the closing table.

If you have plenty of cash in the bank, a conventional mortgage can work. You’ll need a  minimum five percent down payment, or you can put down 20 percent or more to avoid private mortgage insurance. Then again, if you don’t have a huge bank account, or if you simply don’t want to wipe out your savings when buying a house, a low-down payment mortgage is another option.

An FHA mortgage only requires a 3.5 percent down payment. Also, some financial institutions have special loan programs for first-time homebuyers that include down payment assistance. Talk to your bank to see if you qualify for these programs.

3. What is the Credit Score Requirement?

Credit is a big factor when choosing a mortgage product. And unfortunately, a low credit score limits your mortgage options.

Conventional and FHA mortgages are two popular picks among buyers, yet the credit requirements differ. A conventional mortgage requires a minimum credit score between 680 and 700 (depending on the bank), whereas FHA mortgages do not have credit score requirements, although some banks impose their own rules and require a minimum score of 620.

4. Analyze Your Free Mortgage Quote

Savvy homebuyers get pre-approved for a mortgage before shopping for a home. This way, they know how much they can afford, and whether they meet the qualifications for a mortgage. However, it isn’t enough to get approved in advance, you need to carefully review the terms of a mortgage quote to ensure you’re getting the best loan.

Start by requesting a quote from at least two or three banks. As you compare mortgage quotes, look at different factors, such as interest rates and closing costs. Ideally, you should pick the loan with the lowest mortgage rate and closing costs. This results in a cheaper mortgage payment and reduces your out-of-pocket costs at closing.
 
Bottom Line
If you don’t have the best credit or the most money, you may feel that buying a house is out of your reach. However, with so many mortgage products available, there are options for most people. Take your time, research and compare products, and you’ll find an affordable loan.

source: totalmortgage.com