Buying a home is an enormous financial commitment, and to get the ideal mortgage for your requirements, research is key. Here are some tips for making the most of your loan options:
When shopping for a mortgage, it’s essential to compare several lenders in order to find the one offering the most advantageous terms. That means getting quotes from at least three or four different lenders and comparing their terms, rates and fees is recommended.
Start by gathering all of your paperwork and information, such as income, debts and credit score. Doing this will give you a better idea of how much money you can afford to spend on a home.
Once you know your qualifications, start searching for lenders offering competitive loan terms – usually including a low mortgage rate and lower closing costs. Make a list of potential lenders and call each one to speak with their salespeople.
Your lender will provide a loan estimate, which includes your monthly payment and total interest paid over the life of the loan. It also includes closing costs which could total thousands of dollars. A loan comparison calculator can help you compare these figures so that you can determine which option makes financial sense based on your goals and plans.
Don’t forget to factor in any private mortgage insurance (PMI) that may be required. These additional costs can increase your payments and total interest over time.
Review Loan Options
Mortgage loans can be divided into various types based on the amount borrowed and whether they’re government-backed. Traditional conventional loans, government-backed mortgages such as FHA or VA, interest-only mortgages, hybrid or specialty mortgages and more all fall under this category.
Before selecting a mortgage type, take into account how you plan to utilize the property and where you plan to live. For instance, if renting out your house or condo, fixed-rate mortgages might be ideal as they allow you to lock in an interest rate for the entirety of the loan term.
Alternately, you could opt for an adjustable-rate mortgage which adjusts its rate periodically over a year or several years. Whichever loan option you select, make sure it meets the government’s “Qualified Mortgage” standard.
It’s also wise to remember that the mortgage you select will have an impact on your long-term expenses, such as interest rate and points or credits required. These can vary significantly, so research which option works best for you before making a final decision.
Comparing the impact of a mortgage’s annual percentage rate (APR) on your finances is easy with our calculator. It takes into account both combined monthly and total interest payments over the life of the loan as well as any points or credits paid at closing to determine which option best suits your circumstances.
