There is something rewarding about getting a good deal. Whether we are shopping for sneakers or groceries, we are programmed to look for the best possible deal. Buying a home is no different. In addition to the lowest possible purchase price we also want to best loan with the lowest rate and least amount of closing costs. To get this, you need to start by having a good idea of exactly what you want. The mortgage industry and loan process has changed over the past few years. Many loan programs have come and gone but there are still good deals available. In order to get the best loan for you there are a few things you need to consider.
How strong is my application? The number of loan options you have available are directly based on the strength of your application. The application consists of three basic areas: credit score, down payment and debt to income. The stronger you are in these three areas the more options you can explore. Before you start the preapproval process you should have an idea of where you stand. There are many free resources to obtain a copy of your credit report. This report will not only have your credit score number but a list of all monthly liabilities. These are the basis for loan approval. Without knowing where you stand you don’t know how much leverage you have and may consider the first option that comes your way.
Is this the last house I want to buy?The most popular loan option is currently the 30 year fixed rate. Taking this gives you an exact idea of where your monthly payment will be for the next 360 months. With rates still near historic lows this option makes plenty of sense. However if you only plan on being in the house for five to seven years you should consider an adjustable rate alternative. Adjustable rates were given a bad rap last decade mostly because they were used for the wrong reasons. For the right borrower who knows they are going to sell after five years a lower short term interest rate could make sense. Before you think about loan programs you should consider where you will be in two, five and ten years down the road.
What am I paying for?One of the biggest changes over the past few years is with the amount of closing costs that can be charged. Not only has there been a cap on many of the fees they are disclosed multiple times before you head to the closing table. All buyers are free to shop around for the best possible deal and lowest interest rate. However there are times that the lowest rate may not be the best decision. There are instances when taking a slightly higher rate to work with someone you feel more comfortable with is worth it. The same is the case with the attorney and lender you choose. The main objective is to get the home you want within the designated timeframe. If your mortgage broker or lender is incompetent the lower interest rate doesn’t do you much good. As the saying goes you get what you pay for.
A new home is one of the biggest purchases you will ever make. You will be paying this debt for many years to come. It is important that you understand the process, where your money is going and choose the best loan program for you.