Before you make the decision to borrow money, there are important things you need to know. You must be aware of how exactly loans work. With this basic knowledge, you can be able to save funds and make healthy decisions when it comes to advancing loans. For instance, you will be able to know when it is appropriate to avoid debts. It is so important to learn the basics about loans before you begin to borrow.

For instance, if you are contemplating a home purchase, refresh your knowledge of mortgages. You can begin by learning what to do prior to applying for the mortgage, what to be keen about during the mortgage process, and how to effectively use it once you have acquired the home.

Where to start from

Deciding to be a homeowner is often stressful, especially for first-time homebuyers. The biggest questions lie with the issue of affordability and the place to purchase as well as job security. Indisputably, these are legitimate issues that demand serious consideration. The truth of the matter is that there is no perfect time or circumstances to kick-start the journey. However, it is important to deal with house-hunting along with the mortgage process with the same seriousness you would with other significant life events.

Setting a timeline, learning about the market, and knowing your personal financial position and the budget line will make the whole process easier for you.  To get through the process easier, it may be necessary to seek professional help. This is a significant step that can translate to the success or failure of the whole mortgage experience.

An effective agent will watch over the whole course, making sure that all the details of the transactions are smoothly executed, right away from getting the right lender through to the signing of final documents with the attorney. Learn more about this on Bugis Credit

It is very important to organize and file your taxes prior to a mortgage application. Besides, ensure that you can access the letter of employment and analyze the credit history to identify discrepancies if any. Keep in mind that you have a number of alternatives and try to compare the offerings from different companies.

Factors to Consider Before Applying For a Mortgage

•    The cost of borrowing. When you think of applying for a mortgage, do not forget that you will have to pay the principal amount and the interest. In some cases, there could be some additional fees. It is logic to opt for a lender with lower interest and minimize costs as much as possible. It may be difficult to understand how mortgages work because companies may not always give information about their work and the associated costs. That is why it is important to personally run the figures. So, carefully examine the interest rates along with applicable transaction fees.

•    Gain accurate knowledge of the housing market. From a recent S&P study report, there has been a 5.2% increase in home prices. Even though a market may be a stable and accommodating price increase, prices of homes will keep on increasing at a faster rate compared to inflation, leading to the competition of the available houses. However, this condition has no effect on the approvability of first-time buyers.

•    Be aware of your personal finances. Knowing your numbers before you begin house hunting may end up saving you from being house poor. You may underestimate the consequences of not making credit card payments because of the desire to live lavishly. Lenders will always put into consideration the amount of liquidity you have, the debt you owe, your total monthly income, and your credit score among the basic things when determining the much you qualify for and the applicable interest rate. For example, the amount of liquid asset you have help to determine the value of the down payment.

•     Understand credit Barriers. One of the main credit barriers is the unavailability of credit history, a situation that can hamper the application process. Start by using a debit card in order to develop a credit history. Important to note, you may never be approved for a mortgage if you do not have a good credit score. Among the things the mortgage companies evaluate to ascertain whether you are capable of repaying include your work history, the stability of your job, and down payment. In case you have not been on your first job for at least a month, it may be important to allow yourself some more time to make some savings before applying for a mortgage.

•    Educate yourself.  Homeownership is a life-changing responsibility that may involve a lot of aspects. The best way of preparing yourself for success is by educating yourself about the process. Look for a mortgage loan officer who can possibly understand the goals and objectives you have, a person who can be objective in the course of the mortgage process. Calculate your debt-to-income ratio and try to figure out the monthly mortgage payment that is manageable and will prevent you from overstretching yourself to the point of becoming house poor.

Generally, some mortgages may be safe while others may not be. A 30-year fixed rate loan is often perceived the safest and the best you can opt for. This is especially the case if you intend to live in the house for at least five years. Nevertheless, there a number of options in the market and some may still serve you best.  Some of them might be very appropriate for individuals who are self-employed with uncertain though sufficient income. Still, others may be efficient to real estate investors or individuals with specific plans. Even so, you can easily get yourself into trouble, and so it is very important to take time and learn the risks associated with each of the mortgages available out there.


Home buying is a very critical decision that requires a careful approach. There are important things you need to know before considering a mortgage loan. This article has analyzed some basics of borrowing that you need to know. Do not find yourself in a trap you cannot get out. Endeavor to learn more about mortgages and loans.

Published by Charlesa Gibson