7 Questions You Must Answer Before Getting a Mortgage

By Liz Clinger Updated on 6/23/2017

1. Why do I need a mortgage? 

This question may seem obvious.  "I need a mortgage so that I can purchase a home."  Fair enough.  But do you need to buy a home?  Even if your answer is yes, you can still go deeper.  

Do you need to purchase a home this year? 

Do you need to buy a house in this city?  

Evaluate your financial goals and plans before you decide to buy.  Don't pursue a mortgage until you're sure that you're ready for a home purchase.

2. Do I have enough cash on hand? 

Again, you might think the answer is obvious, but it's not.  

How's your credit score these days?  Lower than you'd like?  

Then you'll need more cash, and not just for the down payment.  If you don't have a high credit score, you won't be able to take advantage of the best mortgage rates unless you pay points up front.  This additional fee will likely cost you at least a few thousand dollars.  And then there are closing costs that must also be considered.

3. How much money should I borrow? 

How much you borrow mostly depends on how much you can pay up front, however, it's not as simple as subtraction.  

You might save money if you make a lower down payment and spend some cash on points to decrease your interest rate.  Do the math before you borrow.

4. What mortgage term length should I choose? 

It depends on your answer to the first question.  

What are your financial plans?  

If you intend to live in the house for five years, then plan to sell or refinance, go with the term that will get you the lowest monthly payment.  

If you intend to live in the house for a long time or want to be debt free as soon as possible, go for a shorter term.  But again, do the math.  Determine the best way to meet your needs and save money.

5. What documents do I need to provide?   

Talk to your lender about the documents required early in the process.  It can take weeks to request and receive some federal documents. 

6. What happens if I miss a payment? 

Missing a payment is one of the most important things to determine. You should do your best to never miss one, of course, but sometimes life gets out of hand.  

Be sure of what the consequences will be.  If the results seem harsh or unfair and you don't think you can be consistent with your loan payments, don't get a mortgage. Wait until life is less chaotic.

 7. How soon can I pay off the mortgage?  

Some mortgages come with repayment penalties.  In other words, you can't always make early payments or put in extra money.  Find out what repayment options you have.