The article gives you information on Five Basic Tips when Choosing a Mortgage. There are lots of things to consider once you have found the home of your dreams and want to pursue the matter of securing a mortgage to make it yours. You will need to make the right choices regarding such things as interest rates, term length, type of mortgage, whether to pay “points,”, and then actually compare different lenders and what they have to offer. Let’s look at these topics one by one to understand them better.
Is a fixed rate or an adjustable rate mortgage best for you? Fixed, of course, means the rates will remain the same throughout the life of the loan. Adjustable rates will go up or down with the current interest rates. There are advantages and disadvantages to both. Budgeting will be much easier with a fixed rate loan, and there will be no need to worry about rates going up.
Qualifying for a fixed rate loan might be a little more difficult and, also, if rates should take a drastic plunge, you would have to completely refinance to get the lower rates. A good point about the adjustable rate mortgage is when rates go lower, so does your payment. However, if the opposite should happen, your payment will go up along with the interest rate.
Let’s move on to the term of your mortgage. If you can meet the qualifications for a shorter term loan, you will definitely save money on interest alone. But, if you cannot meet the higher payments necessary for a shorter term loan, you may need to choose a longer length of time to pay it off. Do the math for 15, 20, and 30 year mortgages and see which term works better for you.
The type of loan you apply for will be important, too. Conventional mortgage loans will not be guaranteed by the government like FHA or VA loans will be. Of course, a prerequisite to qualifying for a VA loan is that you are now or have been a member of the military. No-document mortgages are often good choices for those who are self-employed or for those whose credit histories are less than ideal. These loans do not require income verification or documentation of assets or employment. The application and approval process is quicker and simpler, but interest rates are often higher, and not as many lenders offer them.
You will need to familiarize yourself with the “point” system and decide whether or not to pay “points.” They are paid to a lender or broker at closing, and one point is equal to 1% of the loan amount. Be sure to ask about them and understand them fully so you can make an intelligent decision regarding them.
After making decisions on the aforementioned items, you now just need to contact lenders and do some comparison shopping for their best rates and offers. Maybe you know someone who can recommend a good lender. Ask around for advice and referrals, and be sure to keep a record of all offers and discussions so you can compare them later. Good luck!