Buying a home is an overwhelming experience, yet an exciting process. Finding a home you can afford makes the process of getting a good home even more complicated. Finding the best mortgage you can afford should not be a difficult process.
Today, you will find so many lending options around and if you have a wonderful credit history, you should be able to access a low interest rate. This is done through the preapproval process, a very crucial step that also gives you all the confidence you need prior to beginning the process of searching for a home. As you meet a mortgage consultant, be ready to share all the information requested such as employment history, residence history, debts, assets, current income, plus bonuses and commissions, salary and additional properties you might have.
The preapproval process for a mortgage gives a clear picture of your buying power, guiding the process of choosing the best home. Meeting with a consultant helps identify lending options available that fit personal requirements, future plans and lifestyles.
The most important thing is ensuring you have selected a loan solution that easily fits your current financial position. Options include an FHA loan, adjustable rate mortgage or a fixed mortgage rate.
As you look at a fixed rate mortgage, you should expect a monthly payment and interest rate that will not change over the duration of the loan. Such a loan allows you to lock in a palatable low rate of interest and you will be able to service the payments consistently on a monthly basis. With the ARM (adjustable rate mortgage) the rate of interest varies mostly because of the loan agreement terms and market environment. If you use an ARM loan, you will be given the benefit of enjoying the lowest interest payments and principal possible.
Also, an ARM loan is crucial if you know you will be in the purchase process for some time before you enter the home or if you are hoping to refinance it over a period of years. On the other hand, with a FHA (Federal Housing Administration) loan, you will qualify for a low deposit and reduced closing costs. This is because the loan is Federal Housing Agency insured.
Costs worth looking into
As you commence the process of looking for a lender, you need to prepare yourself for the extra costs a new home comes with. When the official transfer of a property is being done, closing costs could arise. Nonetheless, closing costs are negotiable and the seller could end up paying a portion or all the closing costs, which in most cases include title insurance, taxes, attorney fees, originating fees and a survey. It is also possible for a part of the loan to be paid during the closing process to influence the rate of interest. One percent of the principal loan is equal to a point and if it is paid, getting a lower interest rate is much easier. It is also possible to find lenders paying points in a bid to help you if funds are limited or counterbalance the closing costs.
During the process of buying a home and finding the best mortgage, establishing an escrow account has to be done by the third party. An escrow account holds the funds to be used in paying insurance and taxes. The buyer is required to pay about a twelfth of the yearly insurance and tax of the property into the account with every mortgage payment made on a monthly basis.