Are you ready to buy a new home? Before researching crown moldings and ceiling heights, you must find the best mortgage rate. Some real estate brokers encourage home buyers to look for a mortgage to see how much a lender is willing to give them before you go look for a home. This way you know how much money you can offer before you start bidding on homes.
Although real estate brokers often work with their own lenders, you should always do your research and find the lowest home loan rates before signing a 15 to 30-year commitment.
Knowing what you can afford
Before you go looking for a large, extravagant home, take into consideration how much you can afford. First, you must calculate the amount of savings you can use as a down payment. The rule of thumb for savings is to ensure that you can cover your monthly living expenses for three months. This way, if there is a loss of income, you’ll be able to pay your bills until you can find another job or, say, recover from unexpected medical issues. Calculate your monthly income. Write down the number of expenses you have, including car payments, student loans, and credit card payments. Then see how much you can afford after expenses.
First-time buyer programs
There are many first-time buyer programs offered through the government as an incentive for people to buy new homes, thus expanding the economy. These programs sometimes offer grants to home buyers. Often, professionals in certain fields, like teachers or firefighters, will qualify. These programs are not always advertised, so before looking into buying your home, do some research and see if you qualify for any programs.
Typically the initial down payment for a home is 10 percent of the cost of the home. The thing is, the more money you put down on your home, the less money you’ll have to mortgage. This means you’ll actually be saving more money in the end if you elect to go with a larger down payment on your home.
Most mortgages have either fixed rates or adjustable interest rates for mortgages. Adjustable mortgage rates may look more appealing in the beginning because they tend to be lower than fixed rates, but they can grow over time. This means that your mortgage payments may rise unpredictably. Fixed rates are better because you’ll have the same mortgage payments for the period of your mortgage with no surprises.
Mortgage lenders have been known to offer a points program to reduce mortgage rates. The lender will offer the client a certain amount of points toward their mortgage for a fee. If you pay the fee, the rates of your mortgage will go down. Paying these fees will only reduce the mortgage payments by a few dollars a month. It is only worth paying for the points if you plan on taking a mortgage that will go past a seven-year term.
When you’re ready to purchase your home, make sure that you’re prepared for all the costs involved, including the closing costs. It’s best to put a large down payment on your home to lower the cost of your mortgage and search for a mortgage with a fixed interest rate rather than an adjustable interest rate. Look into every program you can to see if you qualify for grants or points systems to reduce your payments. You should apply to more than one mortgage broker to ensure that you’re getting the best rates for your credit rating and down payment.