Unless you have enough cash to purchase a home in your area, securing a mortgage is a must for a prospective homeowner. But which home loan is the best fit for your needs? If you’re ready to begin shopping for a home, here are eight tips for finding the right loan to purchase a new house.
1. Determine Your Budget
Finding the right mortgage for your needs is difficult without knowing your budget. Consider how much you have in savings, what payment you can afford moving forward, and what you can realistically manage as you navigate life and your career.
2. Estimate How Much of a Downpayment You Want to Put Down
Your downpayment determines what type of mortgage you’re able to secure. Certain loans like USDA loans and VA loans require no downpayment. Meanwhile, conventional loans may expect you to provide a downpayment of at least 20 percent.
3. Adjustable-Rate or Fixed-Rate?
You get to choose between adjustable-rate and fixed-rate mortgages. Fixed-rate mortgages produce fewer surprises but won’t allow you to tap into lower rates. Meanwhile, adjustable rates can help you take advantage of lower rates but will fluctuate throughout the life of the loan.
4. Figure Out How Long You Want Your Loan to Last
How long are you looking to pay off your home loan? Longer loan terms like 30-year mortgages offer lower payments but will cost more over time. Meanwhile, 15-year mortgages will have higher payments but will allow you to pay off your loan faster.
5. Don’t Overextend Yourself
Be honest with how much house you can afford. Even if you can get a bigger loan to pay for a house that’s considered out of your budget, you may not be able to maintain those payments and have to deal with foreclosure later on. It’s much better to purchase something safer.
6. Will You Need Mortgage Insurance?
Certain loans will require you to purchase private mortgage insurance if you don’t have a large enough downpayment. Consider this when you’re shopping around for loans and thinking about your ideal downpayment.
7. Do You Need Any Support?
There are ample forms of support for first-time home buyers, which can come in the form of government grants or first-time home-buying loans. If you need financial help to afford your first house, it’s out there.
8. Make Sure to Factor in Unforeseen Costs
When you’re looking for home loans, make sure to remember that you’re going to be paying more than just the downpayment for your home. Inspection costs, renovations, and closing costs associated with the sale are just some of the additional expenses and fees you’ll face once you’re ready to buy a home.
Shopping for the right home loan is an extensive process that requires great care, but taking the time to shop around for a mortgage will set you up for a bright financial future. Use the eight tips above to ensure you have the right home loan for your needs and that you’ve thought everything through so that you’re able to keep your house in the future.