The United States' mortgage debt totaled more than 15.5 trillion in the first quarter of 2019(Opens Overlay), making it the most substantial debt for American households. Conventional wisdom tells us mortgages are good debt because homes typically appreciate in value, but that doesn't mean you should get a mortgage without careful research. Here are things to know before buying a house.
1. Mortgage prequalification and mortgage preapproval aren't the same thing
Mortgage prequalification and mortgage preapproval are steps most people take before making an offer on a house. However, they aren't the same thing.
Being prequalified or conditionally approved for a mortgage is the best way to know how much you can borrow. A prequalification gives you an estimate of how much you can borrow based on your income, employment, credit and bank account information.
Preapproval comes from a lender who has analyzed your finances carefully. They'll tell you how much you may be able to borrow and what your interest might be. Mortgage preapproval is usually done after prequalification, but before you find a home. Preapproval doesn’t guarantee you'll get a mortgage, but if all key factors stay the same it's very likely.
2. You'll pay more without a minimum 20% down payment
Experts continue to encourage buyers to save a down payment of at least 20% before applying for a mortgage. It makes sense, as the larger your down payment, the smaller your mortgage and the less interest you'll pay over the life of your loan.
Comments(2)