When selecting the right house for you and your family takes up so much of your energy and focus, it can be easy to neglect the research you should do to shop for the right mortgage. Here are some tips to help you determine which mortgage is right for you.
Ask Yourself Important Questions
Your first step in shopping for a mortgage should be to determine what your needs and desires are. Start by asking yourself relevant questions like, “How long do I plan on living in this home?” and “How much am I willing to spend for a down payment or a monthly payment?” Having the answer to these questions will help your Loan Originator provide you with the best options for your situation.
Get an Idea of What You Can Afford
Check your credit score to get an idea of your current situation. Lenders will be very interested in your credit score as it can be a larger factor in what mortgage products you qualify for and what your interest rate will be. Consult a mortgage calculator that allows you to plug in your own information and get an idea of what your ideal mortgage payments might look like.
Decide on the Length of the Mortgage Loan
While many people opt for the 30-year mortgage, there are shorter term options like 10 and 15-year loans, too. Typically, a short-term loan will require a higher monthly payment and a lower interest rate than a long-term loan. Consider your financial situation to determine which option works best for you.
Learn About Interest Rate Options
The interest rate is the price you pay to borrow money. Since mortgage rates change with the market all the time, there are two ways you can choose to have the interest work in your loan. Either lock your interest rate so it stays the same throughout the life of the loan and get a fixed-rate mortgage, or let it change as the market changes and get an adjustable-rate mortgage. Both fixed and adjustable rate mortgage have pros and cons. It is good to understand how they work, and your Loan Originator can assist you when it comes time to making a decision about what is right for you.
You will want to consider what your goals are with the mortgage and the house you are getting. If you plan on being in the home and paying on the mortgage for a longer term – say, 5 years or more – then you may want a fixed-rate. However, if you see yourself moving, refinancing, or paying off your mortgage very quickly, you might want to go for an adjustable-rate mortgage which can have a lower rate in the beginning.
Types of Mortgage Loans
Conventional loans are great for first-time or repeat buyers. They are ideal if you have a strong credit history with a good credit score, and money to put down.Typical down payments vary from 3% to 20% depending on first-time home buyer status and allows gifts.
FHA loans are ideal for first-time or repeat buyers. If you are looking for lower down payment options, an FHA loan could be a good choice for you. FHA programs allow as little as 3.5% down payments. These types of loans don’t have first-time homebuyer restrictions, allow for co-signers and gifts, and have liberal qualifying ratios.
This program is for qualifying military veterans and active servicemen and women, it offers no down payment, no monthly mortgage insurance, and liberal qualifying requirements. Gift funds may be used for down payment, closing costs, and prepaid expenses.
Anyone looking to finance a home in eligible rural areas and benefit from no down payment options might be interested in a USDA loan. This is a great option for anyone financing in eligible rural areas who is looking for no down payment options and liberal qualifying requirements.
Jumbo loans are ideal for those who are looking to finance a home for more than what a typical conforming loan allows. You can think of a jumbo loan as being similar to a conventional loan except that it exceeds loan limits. These are good for someone looking to purchase a higher value property, including second homes and vacation homes. Jumbo loans typically require a 20% down payment.
When comparing lenders, you will find that Homestead focuses on each of our borrowers' unique needs. You will receive the best service and we will help you achieve your individual home financing goals. Contact us today to speak to find out find out how we can make getting a mortgage simple.