When looking for a mortgage, it can be tough deciding which option is right for you. You have to know what to look for, and then decide what works for you and your family as you shop around to make the most of your mortgage decision. To help put the process in perspective, here are 5 steps to choosing the best mortgage for you.
1. Decide What is Affordable
Only you can decide how much you are comfortable paying for your home on a monthly basis. Your lender can only take into account whether you’re capable of repaying your mortgage based on factors such as income and credit score, not lifestyle or personal spending habits. Look at your financial situation in its entirety (hint: it can be helpful to create a budget) and factor not only for your mortgage payment, but also for other homeownership costs, such as taxes, insurance, repairs, maintenance, etc.
2. Understand Your Credit
Your credit score is a measure of your creditworthiness, and is based on factors such as debt, repayment history, and how many credit accounts you have. It’s how banks and lenders determine how likely you are to pay off your debts to them, so the higher your credit score is, the lower your mortgage interest rates will be. Since 35% of your credit score is based on any debts you owe, it’s smart to try to pay down or pay off other debts before you apply for a mortgage.
3. Choose the Right Sized Down Payment
Your down payment is the amount of money you pay towards the home at the time of purchase. Typically homeowners put 20% of the home’s value down and borrow the rest through their mortgage, but there are a few other options, such as putting down less money upfront in exchange for paying a higher interest rate, or putting no money down at all, both of which usually require obtaining private mortgage insurance (PMI) per the lender’s instructions. Look at all your fees, interest rates, and monthly payment options before choosing which is right for you.
4. Compare and Shop Lenders
Different lenders offer different mortgage and payment plans, so you’ll want to do your research and compare costs to decide who you want to have handle your loan. Doing your due diligence could save you thousands of dollars, so you will want to get each lender’s mortgage information in writing so you have it to compare on your list of lender options.
5. Choose Your Mortgage
Now that you have done the research, it’s time to review and choose. It’s helpful to ask yourself a few key questions: Can you repay the loan? Are you comfortable with the payment? Have you shopped enough to know this is the right choice? Will anything in your mortgage change in the future?
Once you have found the best mortgage for you and your family, you will need to call your loan officer to proceed with your mortgage application.
At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.
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