If you’re in the process of buying a new home, you know how confusing home loans can be. Just the thought of sitting down with a loan officer can make you want to give up on the process. How do you know you’re getting the best rate? How do you know you’re choosing the right loan?
While I can’t tell you which loan is best for you, we can certainly try to make the decision a little easier. Here’s what you need to know about choosing the best home loan for you:
Know Your Credit Score
As you know, your credit plays a huge role in your new home purchase. From the mortgage you can afford to the rate you’ll secure, your credit score is very influential in the home buying process. Your score may mean the difference between a conventional loan and a government-backed loan.
There are pros and cons to each – a conventional loan offers low interest rates and few fees, but will generally require a much larger down payment. Conversely, a government loan can offer options with little to no down payment, but your interest rate will be higher.
Know your credit and know what you can afford to pay, both as a down payment and as a monthly mortgage payment. This can help determine which loan is best for you.
Know What’s Out There
If you’ve got fair to good credit, there’s a good chance there are a number of lenders out there who are willing to give you a loan for your new home. However, don’t be afraid to look past your bank.
When you purchase your home, you’re free to shop around for the best loan. And you’ve got options! Not only should you explore your local bank, credit union or other lender but you should also explore non-bank lenders like Quicken Loans. Get yourself the best rate, and know what’s available to you.
In addition to banks and lending institutions, you’ll want to check what government options may be available to you. Are you a veteran? You may be eligible for a VA loan. Are you moving to an area with a lower population? Maybe a USDA loan would suit your needs.
Know what’s out there, and study the pros and cons. Choose what’s right for you based on your own, individual circumstances.
Choose Your Interest Rate
Once you’re speaking with a loan officer, there’s a good chance you’ll have options regarding your interest rate. You can choose from a fixed or adjustable rate loan. And you can generally choose the length of time you’ll be paying your mortgage.
The average buyer will opt for a 30 year, fixed-rate loan. That means they’ll make mortgage payments for 30 years at an interest rate that will always stay the same.
Some buyers, though, choose an adjustable rate mortgage. These mortgages may offer lower interest at the beginning of the mortgage. However, those mortgage rates “reset” at predesignated times over the course of the loan. In other words, the interest rate could go up.
To choose the right home loan, weigh your options. Do you want a stable, reliable interest rate and mortgage payment? Or are you willing to risk that rate rising for a lower mortgage payment now?
How to Choose the Right Home Loan
When all is said and done, you’re going to choose what’s best for you, your finances and your family. But it’s important that you know the options available to you. Buying a home is a big step – Donavan D. McFadden and the Marching 2 More team are ready to assist you.