So you fixed your credit score, saved enough for a down payment, know what you can afford, selected a real estate agent, and found a home you like, made an offer that the seller accepted, had the house appraised, and had your house inspected! That’s a bunch of work but now it’s time to get a loan. This thing just got real! This “Buying a House Series” is made with years of experience on the best way to get your ducks in a row so you can get a loan and find the home you want at the price you want. Use the following the tips below to make the process much smoother on you…
Should You Work Directly with a Lending Institution or a Broker?
Most people work directly with a bank but that’s not your only option. Make sure to shop around for a lender. A little shopping can get you better deals on interest rates and closing costs. Some buyers really love to work with a mortgage broker who will search and negotiate the best loan for you. Brokers know the ins and outs of lending and can show the best loan for your particular situation. Brokers, of course, charge a fee for their service which is usually about 1-2% of your loan. Most get this fee from the lender but some may charge you also. Know the situation on how your broker is paid before bringing them on so there are no surprises. If you lack the time or knowledge to properly search for the best loan, getting a broker is usually money well spent.
How Long Do You Plan To Live At Your New Home?
Knowing how long you will be living in your home will help you decide if you want a fixed rate mortgage or an adjustable rate mortgage. Fixed rate mortgages have a fixed rate over the life of the loan. Most adjustable rate mortgages have an initial fixed rate for a period, usually 5 years. After the initial period, adjustable rate mortgages then adjust at a regular interval, usually each year, to reflect market indexes. If the economy does well then so will you after your initial periods is over.
If you are going to stay a long time, most buyers select a fixed rate mortgage because if it’s predictability. If you are going to leave before the initial period of an adjustable mortgage then it may make sense to use this type of loan since they usually are at least a percentage point lower than a fixed rate. This where a broker can really help you decide which is best for your situation. If you know the right questions to ask a banker will give you the information you need to make a good decision.
What Can You Afford To Pay Monthly?
A 15 year mortgage will give you a lower interest rate and a higher payment. A 30 year mortgage will give you a lower payment while paying more interest over the life of the loan. It all comes down to what you can afford monthly. At an average interest rate, you could get a 30-year fixed-rate loan on a $200,000 home and pay about $1,400 per month. Your payment jumps to about $1900 for a 15-year loan but you could save about $77,000 in interest over the life of the loan.
Locking In Your Interest Rate? Should You Do It?
It depends on the volatility of the market at the time you are getting your loan. An interest rate lock allows you to lock in a specific rate for a specified length of time before closing. There is also a float-down option that can be added to the lock in. The float down allows you get a lower rate than the lock in rate if rates happen to get better after the lock was set. These options all have fees attached to them. A broker and your real estate agent can help you with these decisions.
Find Out What Is Negotiable on the Loan
The interest rate is almost never negotiable but if you can ask for an itemized list of expenses tied to your loan to see what could be negotiable or not. It’s could be that you completed everything electronically but have a payment to a courier. That wouldn’t make sense so look at the details and see if you can whittle some of of your closing costs, if you are willing. A broker can really help in this part of the negotiation.
Once you’re through getting a loan, you’ll be on your way to negotiating closing costs…
Buying a House Series Posts
- Buying a House Series #8 - A Thorough Home Inspection is a Crucial Step To Buying a Home!
- Buying a House Series #7 - The Bank Will Need to Appraise the House You Want to Finance
- Buying a House Series #6 - Making an Offer On the Home You Want
- Buying a House Series #5 - Finding the Right Home For Your Family in the Cincinnati / Northern Kentucky Area
- Buying a House Series #4 - Tips On Finding the Right Real Estate Agent in the Cincinnati / Northern Kentucky Area
- Buying a House Series - #3 Tips on Finding Out How Much You Can Afford to Spend on Your Next Home
- Buying a House Series – #2 Tips on Saving Up for a Down Payment on a Home
- Buying a House Series - #1 How Do I Check My Credit Score? How Do I Clean Up My Credit Score?
- Buying a House Series #11 - Tips for a Successful Final Walkthrough
- Buying a House Series #10 - Knowing Where and How to Negotiate On Your Closing Costs
- Buying a House Series #9 - Tips On Getting The Best Home Loan in the Cincinnati / Northern Kentucky Area
Tom Reese has 20+ years experience in helping his clients buy the homes they want at a price they can afford. Tom has helped his clients buy and sell property in every neighborhood in Northern Kentucky and Cincinnati.
About Tom Reese
Helping my clients attain their dreams has been the foundation of my success. With my strong attention to customer service, I have earned my clients continued support and referrals. Put my enthusiasm and dedication to work for you!
Call Tom anytime at (859) 393-1293