California Mortgage Tips for Both New and Experienced Homebuyers

In 2015, interest rates on mortgages were at around four percent. However, the National Association of Realtors estimates that the rates may increase to 4.5% by the end of this year. In December 2015, the Federal Reserve increased its fund rates during its policy-setting meeting. This rate is likely to increase in future a move that will affect the housing market. It is important to consider certain factors when looking for a mortgage in California.

1. Improve your creditworthiness
A good credit profile is important to any lender. When you are planning to buy a home, make sure you manage your credit responsibly. Pay your bills on time and clear all your outstanding balances. Lenders prefer a borrower with 36% or less debt to income ratio.

2. Save for a down payment
The ideal down payment rate on a mortgage is 20%. However, this rate is not fixed, as some lenders require at least 4% down payment including the Federal Housing Administration, whose rate is at 3.5%. Consider making a large down payment, especially if you want to borrow a substantial amount of money.

3. Seek preapproval
Acquire mortgage preapproval before you start house hunting. This process usually determines if you are qualified for house acquisition. Once you are preapproved, you stand a better chance of getting a house that is within your budget.

4. Shop for a lender
During the process of purchasing a home, you should consider looking for a mortgage lender who understands your need and financial situation. Please visit this webpage for more info.

5. Research loan types
There are different types of mortgages including jumbo loans, adjustable rate mortgage (ARM), and fixed rate mortgages. Jumbo loans are used to acquire luxury homes. Consider a 30-year loan if you have a family to look after. An ARM is commended if you would like to move in to your new home in 10 years or less. Interest rates for ARM's often start out lower than the 30-year fixed loans. However, ARM rates are usually fixed for the first years of the loan.

6. Consider your lifestyle
When shopping for homes, it is important to consider activities, which you and your family might get involved in. These include school tuition and your work commute.

7. Remember to budget
As a homeowner, you will have to budget for monthly mortgage payments as well as additional expenses such as property taxes, maintenance costs, home insurance, and homeowners' association fees.

9. Don't forget the closing costs
After applying for a mortgage, you will receive a loan estimate that will give you the total sum of money you need to complete the purchase of the property you want.

10. Beef up your savings account
You should not use all your savings to make your home down payment and clear closing costs. Ensure you put aside a considerable amount of money to cover 3 to 6 months of living expenses. This will save you from getting into more debts when an emergency arises.

California mortgage tips offer a guide to potential homebuyers looking for a mortgage. Many financial institutions offer advice and consultation services to borrowers so that they make the right decisions when taking a mortgage.