How to Pick the Right Mortgage Loan
The most important purchase consumers make during their lifetimes is also the most complicated.
Welcome to the mortgage loan 101.
Knowing how to pick the right mortgage loan can save you thousands of dollars in the Lehigh Valley, which means the amount of effort you put into researching different home loan options is critical for you to save money. We’re here to make the home loan process as simple as possible, while ensuring you do not get stuck with a loan that haunts you financially for years to come.
Let’s review five time-tested tips on how to pick the right mortgage loan.
#1 Determine How Much You Can Borrow
As the largest monthly expense, a home mortgage should be the first expense written down when calculating your family budget. Every other expense, from the monthly payment for a car loan to the cost of weekly groceries, should come next. Your calculations might reveal that you should wait a few months or a year to apply for a home mortgage. The ramifications of defaulting on a home mortgage will hurt you for the rest of your life.
Make sure you can afford a home loan before applying for one.
#2 Term of the Home Loan
The mortgage term refers to the length of a home loan. The most common mortgage spans 30 years, which represents about the amount of time most of us spend in a career. Some mortgages run 10 or 15 years, and some lenders offer customers the option to define the term of their mortgages. If your budget allows you to send larger payment s each month, consider opting for a shorter-term loan. Short term mortgages come with lower interest rates that reduce monthly payments.
#3 Fixed Versus Variable
A 30-year fixed-rate mortgage means you can expect to pay your lender the same amount each month throughout the term of the home loan. If interest rates fall during the term of your home loan, you do not benefit by receiving lower monthly interest costs. A variable rate home loan allows you to benefit from a reduction in the interest rate, but an increase in the interest rate puts you in deeper financial water by having to send your lender more money each month.
The big question here is not whether you should pick a fixed or a variable rate mortgage, but how much it costs to refinance a home loan to change the type of interest rate applied to the mortgage.
#4 Take Advantage of Discounts
Shopping for a mortgage should be like shopping for any other type of product.
You should take advantage of one or more discounts
Military veterans receive a lower interest rate by applying for a VA loan. If you want to live in an undeveloped or underdeveloped area, a USDA loan can reduce the amount of money you send a lender each month. FHA loans attract consumers that have lower the average credit scores. Some lenders reduce the cost of financing a mortgage if you buy a home that comes with a loan that costs more than standard mortgage guidelines.
# 5 Timing is Everything
Timing is everything when picking the right mortgage loan. You want to apply for a home loan during an economic downturn. Less demand for home loans means lenders are more likely to offer better rates and terms to attract business. You should also consider taking out a mortgage during the slower home-buying time of the year, which typically runs from early November to late February.
Bonus Tip
Finally, shop for a mortgage in the Lehigh Valley like you shop for anything else: Comparison shop. There are several online tools to help you compare the cost of taking out a mortgage from different lenders. You might even lock in a mortgage that delivers a favorable rate and term, as well as gives you a gift for doing business with the lender.
