So what exactly is a mortgage? If you have done any research at all you know there are a number of different types of mortgages that come up in your searches. However, at its most basic, a mortgage of any type is a loan used to purchase a house. This definition is simple enough to capture the heart of the term, but it barely scratches the surface of the complex issues that truly make up what a mortgage is.
When you make the decision to buy a home, in the vast majority of the cases you’re in it for the long haul. You’ll have a mortgage payment that you will be responsible for making one time for 15, 20 or 30 years, unless you sell your home at some point and time before then. So, it is easy to see why it is a good idea to shop around to find the best mortgage lenders out there. Keep reading for tips on how to shop around and find the lender that is right for your needs and a rate that fits your budget!
How to look for a lender
Finding a mortgage lender is about more than simply finding a good interest rate for the loan. You want to work with the best mortgage companies, staffed by professionals who can help guide you through the process, and who will treat you with respect throughout your relationship with them.
Below are five tips to help you hunt for the best mortgage lender.
- Get your credit score in shape.A higher score will almost always ensure you get approved for a loan and that you get the loan amount you need at an interest rate you can easily afford.
- Know the lending landscape.It is important to have an idea of what the market is like when you are looking for a loan- is it a buyer or seller market and what’s the economy like?
- Get preapproved for your mortgage.Pre-qualification means you can qualify for a loan and pre-approval means you already have a lender willing to give you the money for the mortgage.
- Compare rates of several lenders.You can search for the best mortgage rates online and it is important to check several places and remember the cheapest rate is not always the best lender.
- Ask the right questions and read the fine print.Ask any questions you have and ask about requirements and fees, payment schedule, forgiveness policy, and early payoff options.
Beef up your down payment
Saving up for a 20% down payment is recommended to make your mortgage loan application more appealing and to help lower the overall cost of your loan. This can be painfully tiring, but it’s one of the most impactful ways to get the lowest mortgage rate. Taking the time to do this will also go a long way in helping to save you a lot of money and time down the road.
Consider how long you’ll be in your house
If you plan on living in your home for less than 10 years, and plan on selling your home rather quickly, then a adjustable-rate mortgages might make more sense. These types of mortgage loans have low initial interest rates that increase significantly once a set period has passed. Homeowners can set the time to be 5-10 years down the road and sell before the rates go up.
What is a good interest rate for a mortgage?
“The Freddie Mac Primary Mortgage Survey says the average rate for a 30-year mortgage in 2017 is 3.94%. That’s incredibly close to the historically low rates the economy experienced in 2012 (3.87%) and great news for home buyers. The Freddie Mac Primary Mortgage Survey says we closed out 2017 with an average rate for a 30-year mortgage at 3.99. That’s a considerable drop from the average rate around this time last year (4.32% during December 2016) and great news for home buyers. If you have an average credit score, you probably shouldn’t consider any rate above 5%. And if your credit score is excellent, you might be able to score rates as low as 2.5%.” (TheSimpleDollar).
While it is true that owning a home comes with its share of responsibilities and it does take money to keep a home looking good, the true value of home ownership comes from the eared value a home can deliver down the road. “According to the Federal Reserve’s Survey of Consumer Finances, a typical homeowner’s net worth was $195,400, while that of renter’s was $5,400 as of 2013”(Forbes). If you have questions about mortgages, the type of loan that is right for you, and what you can do to get a loan secured for your dream home, give us a call today and let us help you with all of your mortgage needs!