What to Watch For and What to Watch Out For
Getting your feet wet in the real estate market for the first time can be a nerve-wracking and challenging experience. You want to buy a home, but don’t necessarily know how to go about doing it. One key part of the process is securing a mortgage on decent terms. Here’s what you need to know about getting that done.
1) Shop Around
Many first-time buyers make the mistake of getting pre-approved through the first mortgage broker they come in contact with. They assume that, for better or worse, the terms of that loan are roughly equivalent to what they could secure with another lender through another broker.
But this is not the case. The more you shop around, the more likely you are to find the best loan and the best terms.
2) Not All Mortgage Brokers Are the Same
For every fantastic mortgage broker you encounter, every broker willing to go the extra yard on behalf of finding and getting the best possible loan for their clients, no matter if it doesn’t earn them the highest in commissions and fees, there is a broker out there just looking to steer their clients into whichever mortgage benefits their business most.
3) Have Your House in Order First
Getting your credit into the best possible shape before you start shopping for a mortgage is key to getting the best terms on your loan. Those with the best credit scores have banks competing to lend them money on favorable terms. Those with poor credit… can still get loans (sometimes).
4) What Kind of Loan Do You Want?
Do you want an interest-only loan? A fixed-rate loan? An adjustable-rate loan? Learning about the various loan options in advance of sitting down with a mortgage broker can help you select the best loan for you, and help you steer clear of brokers that may not have your best interests in mind.
5) How Long of a Term Are You Looking For?
The longer the term, the smaller the payment, but the more interest you end up paying. Thinking about what you’re signing up for in terms of payment only can end up costing you in the long run.
6) What Special Programs May Be Available to You?
Nearly every state in the US, many cities, and the federal government all offer home-buying courses that can help you understand the process from start to finish. Many of these programs offer guaranteed-rate loans, down payment assistance, tax breaks, and other perks.
7) Mortgage First, Home Shopping Second
What’s the point in getting your heart set on a home that you can’t qualify for a big enough mortgage to purchase? Pre-qualification is an important step toward narrowing the field of possibilities, and it keeps you realistic while home shopping.
8) Save What You Need for Your Future Home
Pre-qualifying will tell you what you need to have in terms of a down payment, but you can get a rough idea using online down payment calculators well before you approach a mortgage broker. Do your homework on down payments so you can begin saving well in advance of beginning your home-buying journey.
9) You Don’t Have to Borrow as Much as You Can
Just because you’ve qualified for enough of a mortgage to buy a gigantic home doesn’t mean that it’s in your best interests to do so. Consult with a financial advisor prior to signing to make sure you aren’t putting yourself in a challenging financial position just because you “can.”
10) You Can Always Refinance
While getting the best loan on the best terms your first time out is ideal, don’t let fear of a misstep derail you. If push comes to shove, you can always refinance your home down the line to capture a better interest rate, to access equity, or to get a better monthly payment.
Getting Into Mortgages Is Half the Fun
It may seem like shopping for the new home is where the action is, but if you can throw yourselves into the process and really dig into what makes a great mortgage great, you’ll be better served throughout the process and in your new life in your new home.
