In the market for a new home? Congratulations! Owning a home is one of the most rewarding experiences you can undergo. But before you start shopping for your dream home and picking out paint colors, you need to get financing in order.
Enter – finding the right home loan for you; where the fun truly begins.
Okay, so it’s really not that fun at all. In fact, it’s the polar opposite. Finding the right home loan is about as amusing as getting a root canal. But it doesn’t have to be that way. We’re here to save the day with our mortgage loan tips, which will hopefully make the process easy, stress-free, and maybe even a little bit (gasp) exciting!
From how to find the right mortgage lender to what type of loan is best for you, this guide will help you navigate the world of home loans so you can make an informed decision and get into your new home as quickly – and painlessly – as possible.
Mortgage Loan Tips: How to Find the Right Mortgage Lender
The first – and arguably most important – step in finding the right home loan is finding the right mortgage lender. Not all lenders are created equal, and working with a bad one can turn what should be a smooth process into a complete nightmare.
Here are a few tips on how to find the right mortgage lender:
- Do your research: Read reviews, ask around, and check with the Better Business Bureau to get a feel for a potential lender.
- Compare rates and fees: This is one of the most critical factors in choosing a mortgage lender. Make sure to compare apples to apples when looking at rates and fees.
- Ask about their process: Find out how long the loan process takes, what types of documents you’ll need to provide, and how much communication you can expect throughout the process.
- Get referrals: Talk to friends, family, and your real estate agent to see if they have any recommendations.
Hiring a great mortgage lender is one of the most important steps in finding the right home loan, so keep all of the above tips in mind, and do your due diligence.
Mortgage Loan Tips: Finding the Right Home Loan
Now that you’ve found a great mortgage lender, it’s time to start thinking about what type of loan is right for you. There are many different types of home loans available, and each has its own set of pros and cons.
The only way to know for sure which loan is right for you is to sit down with your lender and talk through your options. In the meantime, however, here’s a quick rundown of some crucial mortgage loan tips that you can keep in your arsenal.
H3: Check Your Credit Score
First up, your credit score. Your credit is one of the most important factors in finding the right home loan. The higher your credit score, the lower your interest rate will be. So, if you’re serious about buying a home, it’s a good idea to check your credit score before you start shopping for loans.
H3: Know How Much House You Can Afford
Another important factor in finding the right home loan is knowing how much you can actually afford. Just because you’re approved for a certain loan amount doesn’t mean you should max out your budget.
You’ll want to take into account things like your monthly expenses, debts, and future goals when determining how much house you can afford. A good rule of thumb is to keep your mortgage payment – including taxes and insurance – to no more than 28% of your gross monthly income.
H3: Shop Around for the Best Rate
Don’t just go with the first loan you’re offered. Instead, shop around for the best rate and put your money where it works best for you!
Interest rates can vary significantly from lender to lender, so it’s important to compare rates from a few different lenders before making a decision. You can use a site like Credible to compare rates from multiple lenders in just a few minutes.
H3: Consider an Adjustable-Rate Mortgage
An adjustable-rate mortgage, or ARM, is a type of home loan that has an initial fixed-rate period followed by a variable-rate period. After the fixed-rate period ends, your interest rate – and monthly payment – will adjust based on market conditions.
ARMs can be a good option for borrowers who are only planning on staying in their home for a few years or who expect their income to increase significantly over time. Just be aware that your monthly payment could go up – sometimes significantly – after the fixed-rate period ends.
Get Pre-Approved Before You Shop
Getting pre-approved for a loan is one of the most critical steps in finding the right home loan. A pre-approval letter from a lender shows sellers that you’re a serious buyer, which can give you an edge over other buyers who haven’t been pre-approved.
To get pre-approved, you’ll need to provide some basic financial information to a lender, including your income, debts, and asset information. Once you’ve been pre-approved, you’ll have a better idea of how much home you can afford and what kind of interest rate you’ll qualify for.
Understand the Fees Involved
Mortgage loans come with a variety of fees, including origination fees, points, and appraisal fees. With that in mind, you must understand all of the costs involved before you commit to a loan.
While some lenders will allow you to roll the fees into your loan balance, others will require you to pay them upfront. So the first step is understanding all of the fees involved, and your second step is comparing them across different lenders. Only then, will you be in the best place to make a decision.
If you’re having trouble finding a great mortgage lender on your own, get referrals from people you trust. For example, talk to your real estate agent, financial advisor, or even friends and family who have recently bought a home.
Getting referrals from people you trust is a great way to find a lender that you can feel confident about working with.
Save Enough for a Strong Down Payment
A solid down payment doesn’t only mean that you’re more likely to be approved for a loan – it also allows you to get a lower interest rate.
It’s worth saving up as much as you can for your down payment to get the best possible rate on your loan. After all, even a slight difference in interest rates can add up to significant savings over time.
A good rule of thumb is to aim for a 20% down payment. If you can’t reach that level, you may still be able to get a loan, but you’ll likely have to pay private mortgage insurance (PMI).
Consider a Government-Backed Loan
If you’re having trouble qualifying for a conventional loan, you may want to consider a government-backed loan. These loans – such as FHA loans, VA loans, and USDA loans – are available to borrowers with less-than-perfect credit and can often be obtained with a lower down payment.
Just be aware that government-backed loans often come with stricter requirements, so make sure you understand all of the terms and conditions before you apply.
Speak to the Experts at Eastern Title
We couldn’t end this guide without giving a shout-out to our wonderful team at Eastern Title. Whether you’re buying, selling, or refinancing residential or commercial real estate, the experts at Eastern Title are here to help.
This is an incredibly exciting time in your life, and we hope that by providing these mortgage loan tips, we’ve made the process a little less daunting for you. Eastern Title has been helping people purchase homes for over a decade, and we have the experience and expertise to make sure the entire process goes as smoothly as possible for you.
Give us a call today—we would be happy to answer any questions you have about mortgages and help get you one step closer to owning your dream home.