In today’s buyers and refinancing market, it’s important to know how to be a savvy mortgage shopper. Knowing what to look for before you borrow a large amount of money is extremely important. Here are some quick tips that can help you make the right decision on your home loan hunt.
Know Your Terminology – For many first-time homebuyers (or even people who’ve had a mortgage for many years) the mortgage world can be very confusing and intimidating. The good news is that it really isn’t that bad once you learn a few key terms. Here are a few things you should know before you get started.
- Loan Types: Your main options are going to be the VA Loan (only available to qualified veterans), FHA Loans (a popular option for first time home buyers due to the low down payment requirements), Conventional Loans (the most common loan option – requires a 20% down payment) and ARMs (adjustable rate mortgages are good for people who know they won’t be in their house for more than a few years).
- Repayment Terms: You’ll be choosing between a fixed interest rate, where the interest rate will not change over the life of the loan and an adjustable rate where the rate begins low for the first five to seven years, and then adjusts to the average interest rate every year after your fixed term ends.
Points – Points are a crucial piece of the mortgage process that any savvy shopper should familiarize themselves with. We have a great article about mortgage points that we recommend you read. Once you do a little research, you’ll find that points aren’t as intimidating as they seem. They are basically pre-paid interest and can really make a lot of sense for someone who is planning on staying in their home for several years.
Mortgage Rates – One of the main reasons why so many Americans are considering buying a home or refinancing is that we are living in one of the best mortgage interest rate markets in history. It’s important to do your research and make informed decisions, but you will also want to lock-in your mortgage rate while they are at historic lows. This will guarantee that you still get your low rate even if rates go up while you’re still in process.
Get Your Finances & Credit in order – One of the most overlooked aspects of the mortgage process is not directly related to mortgages. Get a free credit report and clean up any deliquencies before you commit to any mortgage as this can help you lock-in the lowest rate available to you. And don’t forget to take a look at your budget to make sure you can afford the monthly payment. If you can, see if you can make extra payments each month or year. You’ll be amazed at how quickly you can pay off your mortgage and how much less interest you’ll pay over the life of your loan.
Work with a Lender you Trust – The Home Loan Expert you choose is almost as important as the loan or interest rate you select. Working with a trusted lender can save you many headaches in the long run. Make sure you check out your lender’s mortgage lender reviews to see what real clients are saying about the company.
Once you’ve familiarized yourself with the basics you should feel confident enough to begin working toward getting your first mortgage or refinancing your home loan. Remember, try not to be overwhelmed by the process. If you choose the right lender, this shouldn’t be a problem at all and you’ll be in your new home (or enjoying your lower monthly payment) in no time.