So, you’re ready to take the next step and become a homeowner. Chances are, you’ll need to borrow money to make it happen. Most of us can’t just come up with $200,000 to buy a home with cash.
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As you shop for a mortgage, it’s important to move forward carefully. This is a big commitment — one you will likely be paying for over the course of decades. Here’s what you need to know about getting the best mortgage for you:
Start with Your Credit Score
The most important aspect of your finances when shopping for a mortgage is your credit score. Lenders use your credit score to decide if they will lend you the money to buy a house. Plus, once they make a decision, your credit score will be used to determine your interest rate, and that impacts your monthly payment.
Good credit can save you money on long-term interest charges, as well as save you money each month on your mortgage payment. Check your credit score ahead of time to see where you stand. If you need to work on it a little bit, put off applying for a mortgage. You’ll have more leverage to play lenders off each other if you have a good credit score.
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Since your credit can impact your interest rate, you should know what kind of shape it’s in. If it’s not in great standing, you may want to take steps to improve it before you refinance.
Think About What Mortgage Type Will Fit You Best
Next, compare different types of mortgages. When you shop for a mortgage, think about a 15-year or a 30-year loan. You will pay more in the long run if you have a 30-year loan and keep it the full term. However, the monthly payments will be much lower. Depending on your cash flow situation, it might make more sense to choose a 30-year loan.
You also need to consider whether you want an adjustable-rate mortgage or whether you want a fixed-rate mortgage. You might be able to get a lower rate if you start with an adjustable rate, but over time it could up. With a fixed-rate mortgage, you know your payments will be the same over the life of the loan — no matter happens with interest rates in the market.
Think about your financial situation, and what will work best for you. Many borrowers prefer a 30-year, fixed-rate mortgage. It usually results in an affordable monthly payment and certainty related to the payment terms. However, you might have a different set of circumstances that make a different type of mortgage will work better for you. Use a mortgage calculator to run different scenarios to see what works best for you.
Compare Mortgages from Different Lenders
Next, armed with information about your credit score and what you want from a mortgage, it’s time to shop around. Speak with different lenders about what they are likely to offer you. You can check with an online lender like Velocity Lending to compare different rates and see if you can get the best terms at the best possible rate.
When you shop for a mortgage, it’s important to find something that will best fit with your situation. Sometimes it doesn’t mean that you just look at one aspect of the deal, like the mortgage rate. You should also consider how the whole package works with your finances. Compare different offers and see what will work best for you.
Also, consider whether or not you have special needs. If you need a hard money lender, or if you need some direct financing related to an irregular income situation, you might need to look for a specialist.
Don’t forget to look at customer service. If you know you need a certain customer experience and you are worried about getting that help, you might need to be a little pickier about where you get your mortgage.
When you shop for a mortgage, think about what matters most to you. Start with your individual needs, and then look for a mortgage lender that can provide that while still offering a good deal on your financing.