4 important facts about mortgages that you probably didn’t know

Securing a mortgage is an important, but challenging step

Millions of people have mortgages and plenty more are looking to secure one right now, but in spite of how important a home loan can be, there is a lot of misunderstanding and mystery surrounding it.

To clear things up, here are a clutch of key facts about mortgages that are often overlooked by those that stand to benefit from them the most.

Mortgage rate fluctuate daily

You probably know that the interest you pay on a mortgage will vary depending on a number of factors, but you might not appreciate just how volatile and changeable these rates can be.
In fact, if you compare mortgage rates regularly, you will see that they shift on at least a daily basis. This also means that most vendors only offer particular deals for a very short period of time, so if you see a package you like at a rate that is favorable when weighed against the competition, you may need to act fast to secure it.
Furthermore because of these fluctuations, locking in your rate for a fixed period is generally better than choosing a variable rate deal. With rates at low levels right now, selecting a locked package is even savvier.

A high credit score will drive down mortgage costs

You might assume that you need a squeaky-clean credit rating to get a mortgage in the first place, although thankfully this is a common misconception. Lenders will consider offering deals to people with some blemishes on their borrowing records, or to those customers who do not have much of a credit history whatsoever; unfortunately, the price you will pay for your home loan will be impacted by this.
Conversely if you have kept up repayments, minimized the amount of your credit card balance that you are actually using and paid off loans in full in the past, and accumulated a high credit score as a result, then it will actually be cheaper to get a mortgage. Monthly repayments will be lower and the total amount of interest payable over the lifetime of the mortgage will be literally tens of thousands of dollars less.

Last-minute credit checks are the norm

Even if you manage to get your mortgage application approved, there are still a few more hoops to leap through, chief amongst which is the last-minute reviewing of your credit score that a lender will usually carry out just before closing.
This is important because it means that you should not do anything that could jeopardize your hard-won score between being approved for the mortgage and actually starting the repayments. The lender could well insist that you move to a higher rate of interest if they find that your score has gotten worse in the interim, so resist the temptation to take out any new loans or apply for new credit cards at this point in time.

Large down payments are helpful but not essential

There is an assumption that having a hefty down payment available to support your mortgage application is a necessity, and while it is true that some lenders will not offer products to anyone who has less than 20% of the property’s value available in savings for this purpose, there are still deals for those with smaller percentages set aside.
Indeed there are even particular people who qualify for mortgages without the need for any down payment, depending on their circumstances or the place they are intending to buy.

Rental property investors can explore debt service coverage ratio (DSCR) loans, where approval hinges on the property’s rental income via this concise guide from Griffin Funding to understand investor-focused financing beyond traditional income documentation.

Ultimately it pays to be vigilant of the ins and outs of the mortgage application process, and to make comparisons of the deals available, so that you can make the transition to being a homeowner affordable.