5 Points to Remember When Getting a Mortgage
Before you start to picture yourself in your new home, there is an important step that cannot get overlooked. That is your mortgage.
The mortgage is what allows you to purchase the home. Without it, you would have to have the cash upfront to pay for the property. Not many people can do that.
You have many options when it comes to getting a mortgage. Some are better than others, depending on your financial situation. It’s important that you shop around and determine the best mortgage for you.
As you shop for a mortgage, here are five points you should remember.
There’s More Than a Conventional Mortgage
Did you know that there are mortgages out there that help make housing more affordable, and there’s a good chance you’re eligible for them? Besides the conventional bank mortgage, you could potentially apply for an FHA loan or a USDA mortgage.
If you apply for an FHA loan, ensure that you fall within the qualifications. Speaking to your lender will help you determine what loan is best for you.
Low-Interest Isn’t Always the Best
Low-interest mortgages are appealing. The lower the interest, the less you pay in monthly fees. High-interest rates can make what would have been an affordable mortgage, too expensive to continue paying.
However, be cautious if you think the low-interest mortgage is the best option. There could be hidden fees added in somewhere else, or the rate may only be locked in for a certain amount of time.
Longer-Term Mortgages Will Cost You More
The longer you spread out your mortgage, the more affordable it tends to look. The monthly payments for a 20-year mortgage would be smaller than a 15-year mortgage.
The downside to a long-term mortgage though, is that it becomes more expensive down the road. Each month you have a mortgage, the interest rates get tacked onto your payments. That means every month you’ll pay interest on top of your mortgage. So, the slower you take to pay off the total, the more you pay in fees.
Each Lender is Different
You likely didn’t pick the first house you looked at to be your new home. Chances are, you and your realtor spent time going through multiple homes to find the best fit for you. So, why would you buy from the first lender you talk to?
Shop around for different mortgage lenders. What may seem like a deal from one lender could be quite expensive to the next one. Gather some information from multiple lenders to help you make your decision.
Pre-Qualification and Pre-Approval Mean Different Things
There’s a distinct difference between pre-qualified and pre-approved. Pre-qualified means that you have a good chance of getting approved for the loan you want. However, it is not guaranteed. You could still get declined. What pre-qualified does help is for you to set a budget.
Pre-approved means that you’ve been authorized to borrow money, but only to a certain amount. Once you’re pre-approved, you can then make an offer on the house because you will get the mortgage you need.
Take some time looking at mortgages before purchasing one. Ask the right questions to ensure you have all the information you need. A mortgage is a big decision that will affect your finances for many years to come.