Decoding the Mortgage Decision

The record low interest rates of the past few years have made home ownership once again feasible and attractive to many Americans. The collapsed housing bubble did lead to stricter lending practices and skittish credit markets that posed additional hurdles for would-be homebuyers, however.

Thankfully, people who are still in the market to purchase a home can secure low interest rates as an incentive with the easing of credit markets.

After you”ve decided to shop for a house, what”s next? Choosing a mortgage lender. There are many lenders vying for your business, so here are some mortgage tips to consider when you start the process.

Affordability

The Federal Reserve Board recommends that you sit down and determine what you can afford. Factor in property taxes, mortgage, homeowner”s insurance, HOA fees, utilities, and other incidentals that come with maintaining a property.

It”s also wise to budget enough for an emergency fund and savings. Before beginning the application process, review your credit scores as well. If possible, try to get them raised before applying for loans. This can mean the difference in a home being affordable or not, based on the interest rate you can land.

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Assess the risks and benefits

Different mortgages come with varied benefits and costs for particular consumers. A 15-year mortgage may be a great fit for one couple, whereas a 30-year loan is better suited for an individual who doesn”t want to tie up as much capital in the house on a monthly basis.

Knowing the differences in loans and having a solid understanding of the terms will enable you to make a smarter, more money-savvy decision. The differences between a fixed-rate loan and a variable-rate loan can be substantial. Other loans have terms that penalize early pay-off. Not knowing the difference could be an incredibly costly move.

Choose a mortgage lender

First and foremost, you must confirm that the prospective lenders are licensed before you share any kind of personal information with them. From there, the various rates can be put through the calculator for price comparisons, which can often give you leverage in negotiating better rates with the lender.

Some lenders are better than others; they”ll work to earn the long-term business of clients versus a more profit-centric approach — the kind that led to the housing bubble and its subsequent collapse a few years ago.

By choosing a customer-centric and collaborative mortgage-lending team, you”re more likely to land a loan that fits your dreams, goals, and budget.