Home Mortgage Lenders
Even if you are familiar with the home buying process, choosing among home mortgage lenders can be a daunting process. There is a dizzying array of options available to any home buyer: different interest rates, different loan time periods, and different down payment amounts. Some mortgages are adjustable rate loans, and others are fixed.
How should one choose among these many options when researching potential mortgage lenders? Here are a few helpful ideas.
When choosing between adjustable rate loans and fixed interest rate loans from home mortgage lenders, it is almost always better to choose a fixed interest rate loan. A fixed rate loan ensures that your monthly payment will not increase dramatically, whereas an adjustable rate loan usually does just that. Recently, some home buyers (most often first-time home buyers) bought their home at the peak of the housing market with adjustable rate loans. When housing values evened out or plummeted, these buyers landed in the tough position of having much higher interest rates and higher monthly payments that they couldn’t afford. Yet, because the market value of their homes went down as well, becoming lower than the original purchase price, they could not sell their house either. It is crucial that you have a consistent monthly payment that you can afford, so make sure that you are getting a fixed-interest rate loan when you are talking to home mortgage lenders. (The only kinds of situations where it might be smart to get an adjustable rate loan are situations where you are either selling the house again in a short period of time, or where you’re positive that your income is going to increase dramatically in a couple of years. Both are risky.)
The interest rates on adjustable-rate loans may seem attractive at first, but any savings you achieve with a lower initial interest rate will be lost when the rate goes up. Therefore, you should shop around for the lowest possible interest on fixed-rate loans. 30-year fixed rate loans are a popular choice.
The more money you put down on your house, the less you will owe home mortgage lenders. It is possible to buy a home with no money down or 5% down, but these loans often have worse terms than 10% down or 20% down. For less than 20% down, you will often have to pay extra money to offset the lower down payment, so if you can pull together 20%, that’s probably your best choice. Don’t forget to think of homeowner’s insurance and property taxes when planning the monthly payment you can afford.
When negotiating the price of your home, be sure to take into account any necessary repairs, and plan accordingly. When the home is inspected (after your offer is accepted) the inspection will often reveal work that needs to be done. Use this information to negotiate a lower price with the seller. Don’t be afraid to ask questions of everybody—the seller, your realtor, and potential home mortgage lenders. Be aware of what others have to gain from the situation, and trust your own judgment.