If you’re getting ready to purchase a new home, one of the most important factors in this decision is the home loan that you acquire. Whether you’re looking to buy a starter home or your dream home, the process of getting a home loan is the same. However, the more time and energy you spend shopping for your home loan, the better the outcome may be for you, both in the short term and in the long run.
To help you with this, here are three things to consider when shopping for a home loan.
The Financing Category For Your Interest Rate
Because you’re getting a loan to purchase your home, you’re going to end up paying interest to whatever institution to get your loan from. One of the ways that you can save yourself some money or find some peace of mind is by choosing the right financing category for the interest rate of your loan.
According to Andrew Bloomenthal, a contributor to Investopedia.com, people shopping for a home loan can choose between getting a fixed-rate mortgage or an adjustable-rate mortgage. With a fixed-rate mortgage, you’ll be paying the same interest rate throughout the life of your loan. With an adjustable-rate mortgage, you may be able to acquire a lower interest rate at the beginning of your loan when compared to the interest rate of a fixed-rate mortgage. However, you take the risk of having your interest rate increase after the introductory period, which could drastically increase your monthly payment. The decision you make should consider how much risk you’re willing to take on and how much money you may be able to save over time.
Paying Points Up Front
Ideally, you’ll want to choose the home loan that gives you the best interest rate so that you’re not paying a lot of money in interest back to your lender.
One thing you can do to help secure a lower interest rate is to pay point up front. According to Sarah Davis, a contributor to Money Under 30, mortgage points are interest that you pay up front on your loan. By doing this, you could lower the interest rate of your loan by investing a bit more money now.
Getting Your Mortgage Preapproved
To know exactly what you’ll be in for when you’re shopping for your home, Casey Bond, a contributor to Forbes.com, advises that you get your mortgage preapproved before you start looking at actual homes to buy. When you go about buying a home by shopping for a mortgage first and getting preapproved, you’ll be able to know what type of mortgage terms you can expect and better narrow down the homes that you’re in a position to purchase.
To help make your next home buying process easier, consider using the tips mentioned above when you shop for your home loan.