Best Home Mortgage Loan What To Look For In A Mortgage
With a credit score of 680 or higher, you have a plethora of home loan options. Basically, you can choose your terms, but you want to make sure you find the best financing package. That means looking at financing costs, terms, and lenders.
Financing Costs
The most competitive mortgage market is conventional loans, including both fixed-rate and ARM. That means these types of loans have the lowest rates. Add a 20% down payment, and you will have lenders swooning over you.
Fixed-rate home loans offer security of a flat interest rate. You will be paying the same interest rate over the entire life of your mortgage. You can also lock in todays low rates. You always have the option of refinancing if rates do drop.
An ARM provides lower rates with the risk that they will rise in a couple of years. For those homebuyers who plan to move in a couple of years, this financing can save you hundreds in interest charges.
You can also choose a hybrid of the two, offering initial low rates that will lock in after a couple of years.
Terms
The shorter the mortgage, the less you will pay in finance charges. But your monthly payment will be higher with the short term. The most common mortgage is for 30 years, but you can choose a 25, 15, or even a 10 year mortgage. Choosing terms is really based on what you can afford to pay each month.
Lenders
Conventional lenders usually offer the best financing, even if you need an unconventional loan. Jumbo and subprime mortgages can be processed by conventional lenders. They will find underwriters, which will add slightly to the interest rate of your home loan.
Still you want to investigate all your lending options. Begin by collecting rate quotes on a predetermined loan amount. This way you are comparing similar numbers. Also, be looking at fees to make sure interest savings are not offset by high closing costs.
When you have picked a lender, request a bid. This is when the lending institution will actually look at your credit history and give you real numbers. If you arent happy with the terms, dont be afraid to walk away from the deal. There are many lenders to choose from.
Getting a mortgage can be a very confusing process. There is a lot of paperwork to sign, documents to read and procedures to be followed. You’d think you were applying to go to Harvard or Yale, except they don’t require that much paperwork for you to be admitted! Although getting a mortgage can be a confusing process, there are three terms that every mortgage holder should know to better understand what he is she is getting into.
Going into a mortgage knowing just a few facts will help you immensely in understanding what type of commitment you are getting into.
The first term you should understand is, amazingly, the word “term”. Term refers to the length of the mortgage you are taking out – or the amount of time you are making payments.
Many mortgages run the gauntlet of between ten and thirty years. The longer the mortgage, typically the lower your monthly payment will be (and the more interest the mortgage company makes). Generally speaking, you should go for the shortest term you can comfortable afford – you’ll save potentially tens of thousands (and in some cases potentially over a hundred thousand) pounds in interest by keeping the length of the mortgage as short as you can.
Next, understand the interest rate on your mortgage and how it is calculated. The interest rate refers to the amount of interest charges you will pay for the money you are borrowing, expressed as a decimal – such as 5.2 for 5.2%. Is it fixed or adjustable? In other words, is it the same through the life of the loan or does it change at specified periods in time? Most home buyers should try and steer clear of adjustable rate mortgages even though they can look better up front. They can often reset to higher interest rates and come back to bite you if you aren’t ready for a jump in your monthly payments!
Finally, understand what closing costs are and how they are going to affect your purchase price. Often times, you are going to be responsible for coming up with these closing costs out of your own pocket. Closing costs consists of things such as appraisals done on the house, attorney fees, notary fee, deed fee – if there is a fee they can think of it usually falls under the term closing costs! Be a smart and savvy consumer, if you see a fee that you don’t understand or doesn’t seem right – speak up! Some mortgage lenders try to sneak in any fee they can think of to make a few extra pounds profit.
Understanding these three terms can help make you a more informed home buyer and help you find the mortgage that is right for you. As with any product, it is important to shop around for a mortgage when you are considering buying a house. Even a small change in the interest rate between two lenders can often to amount to thousands of pounds in savings. Don’t be afraid to comparison shop – it’s your money after all!