5 Things Home Buyers Should Know About Loan Options in 2022

If you are planning to buy a home in 2022, it’s a good idea to research different types of lending options ahead of time before you need a mortgage. Ensuring that you are both financially and informationally prepared to get a mortgage when re-entering the market or buying a house for the first time is a good idea.

With rising home prices, navigating the mortgage loan process can be challenging depending on your credit score and job history.

Here are five essential things home buyers should know about loan options in 2022.

1. Prepare For Increased Interest Rates

During the pandemic, interest rates decreased considerably and have been hovering below 3% throughout 2021.

However, both Freddie Mac and the Mortgage Bankers Association (MBA) have forecasted that mortgage rates are likely to rise throughout the next year.

While it is not possible to tell what interest rates will be like throughout next year, it is a good idea to ensure that you are prepared for this potential increase. This way, you can make a decision more easily about what loan options in 2022 are most suitable for you, including whether you should get a fixed-rate or adjustable-rate mortgage.

2. Build Solid Credit

The better your credit score is, the more lenders will be open to giving you a mortgage loan with lower interest rates. If you keep your credit score at 620 or higher, lenders will see you as a low-risk customer.

While it’s far from impossible to get a loan with a score lower than 620, lenders that provide loans to home buyers with low credit scores typically charge much higher interest rates.

In the long run, monthly mortgage insurance charges will cost you a lot more money.

If you want to find out what your current credit score is, you can check it with Transunion, Equifax, or Experian. If you need to increase your credit score, you can build it up first before entering the market for a home.

3. Keep A Steady Job

If you have been at the same job or have otherwise had a steady stream of income coming in for at least two years, you will be able to qualify for a much wider range of loan options.

Besides your credit score, many lenders like to see a history of long-term, stable employment in applicants’ financial records. Gaps between jobs that last more than 30 days or an insufficient amount of money are a couple of issues that limit the range of mortgage loans that potential home buyers can qualify for.

If you are self-employed, make sure you have gathered plenty of proof of steady income when discussing your mortgage options with lenders.

4. Look Into FHA Loans

If you are a first-time buyer or have a lower-than-optimal credit score, this does not mean you cannot qualify for a mortgage loan.

FHA (Federal Housing Administration) loans are ideal for lower-income or new home buyers who are unable to make a 20% down payment.

If your credit score is at least 500, you can get a house with a 10% down payment. If you have a credit score of 580 or more, you can put down an initial payment of as little as 3.5%.

5. Get A Pre-approved Loan

There is nothing worse than finding your dream home only to find that the lender you applied to for a mortgage rejected your application.

Pre-approval can speed up the process so that you do not get stuck or experience a delay once you find the right home to buy.

If you research lenders beforehand and get a pre-approved mortgage, the buying process will go much more smoothly and you’ll be less likely to miss out on a time-sensitive home-buying opportunity.

 

Depending on whether you are a first-time buyer or are looking to re-enter the market, there are many different loan options to explore, including private and federal.

Despite the rising home prices and interest rates on mortgages, there are solid reasons to wait until 2022 to buy a home.

One of the advantages that rising home prices and slightly higher interest rates have created is a falling number of mortgage applications. This could mean that you will have more options to choose from in 2022 than in 2021 despite the country’s shortage of new housing inventory.

Make sure that you choose a lender with your best interest in mind. When you are ready to explore which loan options in 2022 are the right fit for you, contact us today to find the solution.

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