How to Shop for a House Mortgage
Few people can pay cash for a home, so when you're getting ready to buy a house, one of the first things you'll want to do is shop for the best mortgage. As it's likely to be one of the biggest purchases, if not the biggest, you'll make in your lifetime, choosing the right lender is key.
Know What You Can Afford
Before shopping, you'll need to know what you can afford. Review your monthly income and spending to estimate what you can comfortably spend on the mortgage payment, insurance, property taxes, utilities, and maintenance. You can also use a house payment calculator to easily see what you can afford.
Check Your Credit
Before you apply for any mortgage, you'll want to be sure that your credit is where it should be. If you haven't checked your credit score recently, be sure to do so as it will make a big difference in whether or not you'll qualify and what your interest rate will be if you do. Ideally, it should be at least 700. If it's lower than that, work on improving it before going home loan shopping. Pay off as much of your credit card and revolving debts as you can, aiming to use no more than 10 percent of your available credit, and don't apply for any new credit. The higher your credit score, the lower your interest rate will be.
Types of Mortgages
As you begin the shopping process, you'll want to have a good understanding of the types of mortgages that are available. MoneyTalksNews reported that one of the biggest regrets among new homeowners was getting the wrong type of mortgage.
Typical term lengths are 15 or 30 years. The shorter the term, the higher your monthly mortgage payment will be, but you'll also get a lower interest rate, and your home will be paid off quicker. An adjustable-rate loan can seem very appealing with a low initial rate, but as it can and probably will change throughout the life of your loan, that means your mortgage payments are likely to fluctuate, which could potentially cause a big financial problem. Choosing a fixed-rate loan, you can be sure your monthly payments will always be the same as the interest rate won't change.
Compare Loans from Brokers and Lenders
While it takes a lot of time and effort to shop around, doing so is a must, otherwise, it could cost you thousands. Keep in mind that neither brokers nor lenders have to find you the best loan, it's all up to you. Brokers arrange home loans with a lender, rather than lending money directly. Be sure to compare loans from both lenders and brokers to score the best deal. No matter who you're dealing with, they may offer different fees and interest rates to different consumers for the very same loan, even among those with the same qualifications.
You might check with family members, friends, coworkers, and neighbors to find out if they have recommendations in addition to checking online marketplaces, which will allow you to compare lenders and interest rates. Once you've narrowed down the options, research each one by reading reviews to get an idea of what their customer service is like and how reliable they are.