Owning a home is a goal that many of us share. But it’s not as simple as choosing a house and laying down the money. Unless you have plenty of money saved up, you’ll have to get a mortgage first.
Many prospective homeowners will qualify for a mortgage. But comparatively few get the best possible deal on one. Most simply go to the nearest lender, fill out an application, and proceed with whatever kind of deal they’re offered. But if you shop around, you’ll find that different lenders offer vastly different terms that could make a huge difference in how much you end up paying for your home.
If you’re looking to save money, here’s some advice on what you need to do.
Save up some money for a down payment. There are loans out there that do not require a lot of money down, but you’ll likely get a better interest rate if you make a down payment. 20% is the standard amount required these days, but many lenders offer loans with lower down payment requirements.
Before you start shopping for a mortgage, do your homework. Order a copy of your credit report, check it for errors, and dispute any that you find. This will improve your credit score and help you qualify for the best possible interest rate. Also check the newspaper or look online to find current interest rates to assist in bargaining.
Consider getting preapproved. This simply means going to a mortgage lender before you start shopping for a home and finding out how much they would let you borrow. This will make it easier to find a home you can afford, and it can also be useful when negotiating a price with the realtor.
Check with different types of lenders. You can get a mortgage from a bank, a mortgage company, a credit union or a savings and loan. The bank you currently do business with is a good place to start, because they may offer better terms and interest rates to current customers. But don’t stop there. Checking with several lenders will give you more choices and more negotiating power.
Pay attention to details. For each loan you’re offered, find out the interest rate, whether it’s fixed or adjustable, the monthly payment, the annual percentage rate, points, fees and private mortgage insurance. If you look at the big picture, a loan that seems like a great deal might not be as good as you thought.
Don’t be afraid to negotiate. If one lender offers better terms but you’d prefer to do business with another, ask if they can match or beat the lower fees and/or interest rate. Mortgage lenders are eager to get your business, so if there’s any way they can accommodate you, they usually will.
Shopping for a mortgage is a lot more complicated than shopping for a new television. But if you play your cards right, shopping around can pay off in a big way. Differences in interest rates and fees that seem small can save you thousands of dollars over the life of the loan. As tempting as it may be to jump at the first offer, comparing loans from multiple lenders is well worth the time spent.
Owning a home is a goal that many of us share. But it’s not as simple as choosing a house and laying down the money. Unless you have plenty of money saved up, you’ll have to get a mortgage first.