Posted on: 30 January 2019
There is so much for a consumer to learn about home mortgages that you almost feel completely overwhelmed by the information. Yet, you have to inform and educate yourself to get the best possible mortgage so that you are not simply agreeing to whatever terms a lender gives you. If you want the easiest and best possible mortgage loans, here is what that looks like and what you need to know.
High (Good) Credit and Low Interest
Yes, it is difficult for a lot of people to get good credit. Lenders want to see a score in the low 700's, but if you have that or better, your interest rate drops. Very few people have perfect credit because the irony of credit is that you have to have some credit history to get your credit score, and some credit history includes credit cards or loans for other things you wanted or needed, like a car or college education. Hence, perfect credit of 850 does not really exist, but it is something people can shoot for because it lowers the interest rates on mortgages. The higher your credit score, the lower the interest rate, and that is exactly what you want so that you do not spend ten-plus years making interest-only payments on your home.
If a lender says, "How about PMI points?", run, do not walk, from the room. PMI, or private mortgage insurance, is money added to the cost of having a mortgage. As someone with really good credit, you may not hear about PMI at all, but it is not something you want. Each "point" of PMI is valued at two to four thousand dollars extra, on top of what you pay in interest and principal, and you may have to pay that annually to "insure" your mortgage. Find another offer and/or another lender; with good credit that is very doable.
Escrow is this marvelous thing that mortgage companies do as a service for you. They set up an escrow account, whereby a portion of your monthly payments is set aside to pay property taxes and homeowner's insurance every year. You never have to worry about these bills, and you never have to be the one to pay them directly or deal with their calls. Your mortgage company uses the money in the escrow account to handle these affairs for you so that all you have to do is make your monthly mortgage payment.Share