Shopping for a mortgage is an unavoidable part of buying a home. It can be confusing, though, especially if you’re doing this for the first time. That’s why you need a qualified real estate agent on your side to help you navigate. Here are some steps to take to find out which mortgage is right for you.
1. Determine How Much You Can Afford
Since this is the biggest investment you’ll ever make, you have to make sure you can afford it. And not just afford it, but afford it with extra money to spare so you don’t spread yourself too thin. For a general idea of what you can afford, try online calculators. For more of an in-depth and accurate look at the price range you should be in, contact a few different lenders and meet with each. Check your credit score now and start taking steps to improve.
2. Set a Savings Goal
In addition to lenders wanting you to be able to qualify for the loan itself, they also want to see something left over in your account to pay for the down payment and all the closing costs. It’s best to put down as much as is comfortably possible, which will give you a bit of instant home equity. A very small down payment doesn’t give you much wiggle room if you have to sell due to a downtown in the market or a job loss.
3. Consider Loan Lengths
You may be feeling a little anxious when you hear about a 30-year mortgage…after all, that’s a long time to be committed to a big monthly chunk of change. While 30-year terms are standard, you can also choose from 10- and 15-year loans.
4. Choose the Right Type
There are many different types of loans for borrowers depending on a variety of factors:
- VA loans for those with a military connection
- USDA loans for those living in rural or suburban areas
- FHA loans for those with a lower credit score
- Jumbo loans for those who are buying a house that’s more expensive than standard loan guidelines will allow
- Conventional loans, which aren’t federally guaranteed; down payments can be as low as three percent and qualifying is generally tougher than government loans.
5. Know How Interest Rates Work
The price you pay to borrow the money you need for your home is called the interest rate. Mortgage rates fluctuate all the time, so you want to be sure you get the lowest one possible. You can either lock in your interest rate over the long term, or adjust it once a year and let the market move it along.
Fixed rate mortgages are just that, fixed; while an ARM, or adjustable rate mortgage, resets itself yearly after an initial term of three, five, seven or 10 years.
6. Shop Around for Mortgage Lenders
It’s wise to call at least three lenders, and meet with each. Just like any other big purchase such as a car, you need to do your homework to make sure you’re getting the right fit. Every lender is different, so don’t just go with the first one you choose. Don’t know where to start? Ask your real estate agent for mortgage lender recommendations.
Contact Berkshire Hathaway Premier Properties with All Your Mortgage Questions
For more tips by a qualified real estate agent on which mortgage is right for you, contact Berkshire Hathaway Premier Properties today at 832-626-4889.