- Posted by: steve
- Category: mortgage news
Is it better to go with the first good option you see or shop around and look at the different home mortgage rate options? Here’s our advice.
Buying a home can be an overwhelming process. Each step leading up to the purchase of a home can be challenging. Don’t let the home mortgage loan portion be the most stressful of your process.
Getting a proper loan for your new home should be a smooth and exciting process. You can make it easy on yourself by understanding not only what you are going to need from your loan, but what you can expect from it as well.
With Americans already in so much debt, choosing a loan that you can pay comfortably for many years is important. It’s also important to find a rate that will allow you to pay down your mortgage instead of paying it all towards interest. Find a rate that is steady and won’t skyrocket or plummet.
It is always good to shop around when looking for a loan that will make your dream home yours. It is absolutely essential to look at many different options and find the rate and loan payment plan that is best for you.
We’ve done the heavy loan lifting for you and have compiled a list of why shopping around for the best rate is worth your time and how it will save you money:
You’ll Find A Lower Rate
By shopping around, you will find the lowest rate possible for your given circumstances. Credit scores, income, assets, FICO scores and your age are all things that are considered when a lender determines your rate.
Things like level of education and how much is in your checking and saving accounts are also considered. However, every lender has different standards when determining a home mortgage rate for a buyer.
Taking a rate that is first offered someone for a home mortgage loan is about a silly as marrying someone after the first date. Considering a home mortgage will be with you for many years to come much like a spouse, you need to shop around like you ideally did when choosing a partner. Getting to know your lenders, the details of their plans and rates is absolutely essential.
Where to start your search? Online of course. Use the Tinder or OkCupid of the home mortgage world. Use an online calculator and start searching online. You’ll gain the initial information you need before you even contact a lender. Digital searches will inform you of which direction you need to go and with whom to set up your first mortgage “date”.
Considering how often rates can fluctuate, it is important to find the lowest rate when the market is at a reasonable place. Make sure you provide all of your options with the exact same information so they can consider the same loan amount for you.
You’ll Find The Best Type Of Home Mortgage That Will Help You Save
Knowing all the details about the kind of mortgage that will save you, in the long run, is important. We aren’t talking about length here, we are talking about different mortgage types.
Choose between an Adjustable Rate Mortgage and a Fixed Rate Mortgage. An Adjustable Rate Mortgage will offer you a very low initial rate for the first five to seven years. If you plan on refinancing after the first five to seven years, this could be a great option for you.
It’s an especially great option for you if this is your starter home. Most people only live in their starter home for three to five years, which would allow you to then sell your house and get out of the ARM mortgage having benefitted from the low rate for the years you spent in that house.
The thing about ARM mortgages is that while the rate is low for the initial years, you aren’t building equity in the home. However, if home values are going up in your area, an ARM mortgage is great because your home will gain value for resale.
A fixed rate is great because if home values do change, you can rest assured that your rate is never going to change like that of an ARM mortgage.
If in five to seven years the market completely changes, you will have peace of mind that your payment will stay the same. You might have a higher interest rate from the get go, but it’ll be a slow and steady path to winning the race and building equity in your home.
While ARM mortgages are more of a gamble, they will offer you a low rate that you can get out of in years to come. Fixed rates are reliable and won’t skyrocket or plummet. Choosing the best type of loan for you will save you money in both the short and long-term aspects of your loan.
You’ll Find a Term Length That’s Comfortable
Shopping around will help you compare the total dollar amounts of different home mortgage loans for all of the different length terms available. A 15-year mortgage will probably have a higher rate than that of a long-term or 30-year loan.
Consider all of your financial goals as you shop for the perfect loan length for you. Do you want to have more monthly cash flow with a lower rate but a longer term? Would you rather have a higher rate and higher monthly payments but end up paying much less in the long run with a shorter loan?
Paying your debt off almost a decade and a half earlier with a 15-year loan is desirable, but if it’s not comfortable then go for the 30-year. Regardless, it is important to shop around for ultimate savings by knowing what term length will work for you.
Shopping Around Will Allow You To Negotiate
Lenders have to provide you with a Good Faith Estimate of the total costs that will be associated with the mortgage for your home. This will include closing costs, monthly expenses, and general information about the out-of-pocket dollar amount required of you.
Many programs require mortgage insurance premiums for those applying for the loan. This is regardless of the amount you pay for your down payment. The Good Fatih Estimate will force lenders to accept your application if you meet all of their criteria.
While it is certainly not a loan offer, it will solidify your application acceptance. This document is great because it can provide you with all of the truthful information you’ll need going forward with your home mortgage.
Once you’ve selected a lender and they’ve given you an offer and a rate, you will be able to negotiate better terms for your loan based on your Good Fatih Estimate. You can ask various lenders as you shop around to explain or write down all of the costs that they will associate with your loan.
The interest rate, fees, etc. are important to consider when choosing your plan. You can then try to bargain and see if any of these fees can be waived. Some lenders will reduce fees or offer you lower rates if you are already a client of their bank.
It is not a bad thing to get some competitive nature going when communicating with your lender. You can negotiate with them by using the information you’ve found on mortgage offers from other banks as you ask your desired lender to match their price.
Once you’ve found your desired rate you can get it locked in with a written agreement. If you had never shopped around, you certainly wouldn’t have been able to compare offers and find the perfect negotiated rate possible.
Shopping Will Help You Find Discounts, Offers, and Grants
There are many ways to find special loans that are specific to your current financial situation. For example:
The Federal Housing Administration loans can get you a mortgage through the agency within the U.S. Department of Housing and Urban Development.
The FHA offers backing for lenders as a source of protection so your lender won’t suffer from losses if you happened to default on your mortgage. These plans do come with competitive interest rates and usually require a smaller down payment. You need a credit score or 580 or higher to qualify for this home mortgage.
Do you live in a rural area or are you a farmer? Then there’s a plan specifically for you!
The USDA Loan
This loan is for home buyers in rural areas. This type of home mortgage loan will guarantee your home mortgage and you might not even be required to make a down payment.
The loan payments are fixed and you need a credit score of 640 or higher to qualify. There are income limitations for this type of home loan approval, but they vary from state to state.
There are also loans from the U.S. Department of Veterans Affairs. They help active-duty military members, vets, and surviving spouses in their quest for buying a home. The VA loan guarantees to pay for part of the loan. They have great interest rates and also don’t require a down payment.
With the VA loan, there is no credit score required to qualify. The good news for these qualifiers is that if it becomes difficult to make your payments, the VA will negotiate with your lender for you.
FHA Section 203(k) Loans
If you’ve decided that a fixer-upper home is the best option for your current financial situation, then a Section 203(k) program may be best for you. These loans are backed by the FHA. They consider the value of a home you are interested in after improvements have been made.
This loan option will give you the money you might need to carry out the home improvements in your potential project. They’ll include these improvements in your mortgage so you can hit the ground running when you purchase your needs-to-be-renovated home! What’s more? These loans only require a down payment of about three percent.
There are many programs that the federal government offers in a variety of states. These local grants and programs are available to help first time home buyers. Every state and community should have websites with all of the information you’ll need on applying for a housing grant or program.
When it comes to home mortgages, consider contacting a real estate agent to learn more about the grants and programs available in your area.
Teacher Grants and Loans
The rising costs of real estate can often prevent teachers from living where they would like to. However, there is good news: there are many organizations that offer home loans for teachers!
Firefighters, teachers, and other civil servants can get a discount through the Department of Housing and Urban Development. They can often qualify for a 50% discount on their home mortgage loans.
The only catch is you can’t currently own a home, and you have to commit to using the new home as your primary residence for next the three years.
Failing to live in the residence for three years will require you to pay the full cost of the home back to the department. The Teacher Next Door Program, Educator Mortgage Program, and Homes for Heroes are other fantastic options for teachers when searching for a grant or loan for their new home.
Save Big or Go Home
Loan rates are at an all-time low. Now is the time to up your saving strategy while getting the home you have been dreaming of. There are so many benefits to shopping with multiple lenders and checking all of your options before deciding on the best home mortgage for you.
Once you’ve decided on a lender, choose the type of mortgage you want (fixed or ARM), and then decide on the length of that loan term.
Once you’ve decided on the loan type and length that you are comfortable with, start to negotiate where possible. Use information from all of the other lenders that you’ve gathered and do your best to bargain with your bank to set the most comfortable terms for you, your home, and your family.
When you’re ready for the best mortgage plan on the market today, contact us immediately. Help is standing by to pre-approve you.