Mortgage can be a very dry and mystified subject. If you have not done a ton of refinances or home purchase in your life, it can be a pretty intimidating process.
A majority of homeowners walk into their local bank to apply for a mortgage without doing any background research. As a result, a substantial number of people don’t understand the terms of the mortgage they agree to repay.
Undoubtedly, a mortgage may count as one of the largest debts you may take in your lifetime. It can take years, if not decades, to repay while also accruing a considerable interest. Subsequently, you can’t afford to make mistakes with your mortgage. What does it take to be a responsible borrower? If you’re looking for mortgage options to help you find the best one for you, this article offers five tips for choosing the best mortgage.
1. Assess your situation.
Before you choose a mortgage, you should assess your situation and needs. This way, you can select a mortgage that fits your unique situation and needs. Below are various factors that will affect your mortgage.
- Financial wellbeing: your credit score can affect your loan options. People with high credit scores can get mortgages at lower interest rates. Also, your Loan To Value (LTV) can affect not only the rate you would qualify for but also in some cases determine whether your loan gets approved or denied.
- Life plans: Research by the United States Census Bureau reveals that the average person moves residences 11 times in their lifetime. Consequently, you must consider how often you plan to move due to life events and career reasons. How long you stay in a home will affect your mortgage options.
- Potential home cost: your mortgage will depend on the cost of your home.
2. Determine how much you can borrow.
Lenders differ on the amount you can borrow. Speak with a Loan Agent and find out what options you qualify for. You can get connected by clicking on "Speak with A Loan Agent" on our home page (www.KnowMortgage.com)
If you are already in huge debt, the amount you can borrow will be lower. As you determine how much you can borrow, consider how much you want to pay each month. If the amount is too high, you may become house poor -you own a house but can’t afford to save, take a vacation, or purchase a car.
3. Consider loan options.
When comparing home options, consider the loan term, loan type, and interest rate.
- Loan term: the common loan terms are a 15-year and a 30-year mortgage. However, other terms are also available. The term defines the duration you will pay the loan. In the 30-year mortgage plan, you will pay lower monthly installments as compared to a 15-year mortgage plan. However, you will pay more interest in the course of the life of the loan.
- Loan type: you can choose a mortgage from three primary loan types, primarily conventional, FHA, and special program loan. For example, special program loans are government-backed for different groups like veterans and rural residents.
- Interest rate: The most common types of mortgages interest rates are fixed and variable rate. A fixed-rate ensures that you pay the same amount monthly for the duration of your mortgage. Variable-rate mortgage means that the interest rates go up and down depending on the market conditions.
4. Compare lenders.
It is best practice to shop for lenders to get the best mortgage. You can ask your family and friends for suitable lenders. Also, it’s advisable to shop for lenders online to get the best deal. Hence, get multiple offers from different lenders and compare their rates and terms. Do not choose a lender mainly because of the interest rate appeal—also consider the lender’s expertise, reliability, and financing options that fit your needs.
5. Watch out for mortgage fees.
Mortgages come with various costs that you should consider. Ensure that before you choose a mortgage, you do the math to get a good deal. Fundamentally, there are no one size fits all solutions, and a mortgage that’s ideal for someone else may not be suitable for you. The secret is shopping around for different mortgage options to find the perfect fit and at a good price. Get connected to a lender visit our home page (www.KnowMortgage.com) and click "Speak with A Loan Agent"