For those who are ready to purchase a new home within the next year or two, it’s important to know the steps in the home buying process to not only save money on your home, but also save money on your mortgage. Here are some factors to consider before choosing the mortgage that is right for you and your new home:
- First things first, how much do you want to borrow? Mortgage calculators are available online and can even tell you how much you can be borrowing. Ultimately, it’s good to know how much you want to be spending a month or how much you want to give as a down payment. After you know your maximum monthly payment or down payment, you can decide what you feel comfortable with spending and choose a mortgage loan that works best for you.
Need to know how much home you can afford before you start your home search? - The most common mortgage is the conventional loan and majority of buyers choose the 30-year fixed rate option. Conventional loans cannot be used by a home that is more than 4 units and a popular conventional mortgage program is the Conventional 97, which allows for a minimum down payment of just 3% on a home. FHA loans are insured by the Federal Housing Administration and are more popular due to the flexible approval standards and low down payment requirements.
- Fixed or adjustable rate? Depending on your financial situation and goals, either rate could be a good fit. For people planning on living in their home for a shorter period of time, adjustable- rate mortgages (ARMs) may be more beneficial. ARMs usually have lower interest rates in the first years and then can fluctuate to match current market trends. Fixed mortgage rates do not change. Homeowners keep the same interest rate for the entire life of the loan, which enables them to create a consistent housing budget.
- Your credit score is important to know before choosing a mortgage for your home. People with high credit scores get additional mortgage options and people with low credit scores get more aggressive mortgage rate options. Spending your money responsibly and paying your bills on time account for majority of your final credit score, along with the type of credit you use and how much credit your using at a time.
Having all the information you need as well as knowing as much as you can will help you obtain the mortgage that will be most suitable for you for you to live comfortably in your new home!