Question: How to find the best mortgage
loan.
Answer: For The Best Mortgage
Loan - Here's a few steps to follow:
Home mortgage
shopping is not an innate skill; it is not taught in school
and is definitely not second nature to the majority of
Americans. It is, however, a very important skill to have -
especially if you're buying a home and want the best
possible deal on your home mortgage. And the good news is,
it's easy to learn.
A survey commissioned last year
by Zillow.com and Harris Interactive found that borrowers
spend twice as much time researching a car purchase than
they do their home loan - 5 and 10 hours, respectively, yet
the average home costs five times more than the average
car. This disparity can cost a borrower thousands of
dollars in the long run.
To avoid losing out on your
hard-earned dollars, here are a few tips to help you take
control of the mortgage shopping process:
1. Be
Prepared. Before you even start mortgage shopping, take a
deep look into your finances. Determine what you can
afford. As a rule of thumb, the total cost of your mortgage
payment - including any taxes and insurance - should not
exceed 30% of your take-home pay. You'll also want to get a
good ballpark estimate of your credit score. Your credit
score impacts your interest rate as well as your
eligibility to get any loan. Currently, one-third of
Americans cannot get a home loan because their credit score
is below 620.
2. Know what mortgage type is right
for you. There two main types of mortgages: Adjustable-rate
mortgages (ARM) and fixed-rate mortgages. Adjustable-rate
mortgages have fixed rates for a short period (usually 3, 5
or 7 years) and then readjust. These loans are generally
considered riskier because the interest rate and payments
can increase when the loan adjusts. However, if you are
only planning on living in your house for a shorter period,
these loans may make sense for you, especially because
you're likely to obtain lower rates. A fixed-rate mortgage
is just that fixed. The interest rate stays constant
throughout the period of the loan. With both fixed and
adjustable-rate loans you can select various repayment
periods. The most common term is 30 years, but if you can
afford the higher monthly payments of a 20- or 15-year term
loan, you will save money with the lower rate and quicker
payoff period. The most important factors in selecting your
loan type is the length of time you plan on staying in your
home and your risk tolerance.
3. Remember your
30-day window. There is no such thing as too many loan
quotes. Borrowers may shy away from getting multiple loan
quotes, fearing their credit will be impacted when multiple
parties check their credit within a short period of time.
However, you have 30 consecutive days in which multiple
pulls of your credit score, or "rate shopping" won't
affect your credit. With that in mind, take advantage of
the 30-day window and get as many loan quotes as possible
to get the best rates and terms. Note that in order to
compare quotes apples-to-apples, it is important to get
quotes from lenders around the same time as rates can
change daily. It is always wise to double-check the rate
you get from a single broker or bank to make sure you
really are getting a good rate and that you find a lender
that you trust.
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