5 Things You Need to Know When Going for a Mortgage

1. Your credit rating counts.

This is one of the key pieces of information lenders will consider when you apply for a mortgage. Having a low credit rating can either contribute to a loan denial or force you to pay more in interest on a home, which could come out to thousands of dollars in unnecessary spending. Make sure your credit rating is the best it could possibly be by paying off high-balance credit cards and diligently looking for discrepancies in your credit report that may have resulted in a lower score.

2. Mortgages are negotiable.

Many first-time home buyers view their mortgage as a financial sentence doomed to carry with them for the next 25 years, but this doesn’t have to be the case. There are dozens of fees that come with taking on a mortgage, but you may be able to eliminate some of those fees. Get in touch with multiple representatives and go over your options before you pick your lender.

Don’t give away your negotiating power! Take the time to negotiate with your lender because it could potentially save you lots of money in the end.

3. Variable rates vs fixed rates.

Record housing prices are tempting buyers to go with a floating rate mortgage. At first sight, it is a no-brainer when you compare a variable rate mortgage to a 5 year fixed rate mortgage. But given the current narrow differentials between fixed and variable rates, a fixed rate eliminates all the risks that come with an interest rate increase.

A variable rate mortgage makes sense for people who only have a handful of years left before paying it off. It also makes sense for those who use their monthly savings from going variable vs fixed to lower the principal owed.

Even though rates seem unlikely to be going up anytime soon, fixed 5 Year mortgage rates would make the most sense for those who have stretched their finances to buy a property. The fixed aspect would guarantee the same monthly payment for the next 5 years providing consumers with peace of mind.

4. Mortgage programs are not comparable.

One of the biggest traps that first-time home buyers fall into is thinking that they can compare mortgage programs across the board. Different programs will have different terms and different perks, so it can be frustrating to see them all as the same.

A better approach is to compare interest rates, and then to take into consideration which programs have the most perks for you as a home buyer. You may find one really big concession in one program that you can’t find in any of the others, making it a worthy investment.

A home loan where the lender pays the borrower a lump sum or installments that don’t have to be paid back immediately is known as a reverse mortgage. If you want to know what a reverse mortgage is good for then ask yourself if you have enough money set aside for your retirement or not. If the answer is no then this sort of reverse loan can help you because you won’t be obligated to pay it back at regular intervals. Instead, you can have access to the money you need to make your retirement more enjoyable and comfortable, and the home loan balance will not be owed until you no longer live in your home for any reason.

A hard money loan is a financing tool that is most commonly used by professional Real estate Agents and is typically issued by individuals or private investors. According to North Coast Financial Inc., there are Advantages and Disadvantages in using a Hard Money Loan, one of its advantages is they are approved and funded quickly which can be funded within 3-5 days if really needed compared to the traditional Lenders. But one of its disadvantages is the high-interest rate compared to traditional lenders which goes higher the longer you keep your loan. So may not want to keep the loan for a long time as it is riskier that the interest rate will go higher in time.

5. A bigger down payment saves you money in the end.

It may sound like a dream come true to pay as little down as possible on your dream home, but remember, the more you’re left to pay off, the more you will spend in interest. If you have the chance to save more money before purchasing your new home, it is often wise to do so. Paying as much as 20 percent down will shave years and interest costs off of the total investment in your new home.

So what would you rather do? pay as little as possible as you can now and take the risk of having a higher interest rate in the long run which mean double or triple of the original payment, or pay down as much as you can and lessen the risk of paying more in the future?