When you’re purchasing your first home, there’s a lot to think about. In addition to finding the perfect location and coming up with a budget, you’ll also have to consider many factors regarding your mortgage. To keep your stress levels down and to be as prepared as possible, read our list of some of the most important mortgage tips for first-time home buyers.
Settling for the first quote you get from a mortgage lender could cost you thousands of dollars in the long run. We suggest researching a variety of mortgage lenders and comparing at least three quotes before you make a final decision. Spending the time to shop around will be well worth it in the end.
Before making an offer on a home, you must prequalify for a mortgage. For you to prequalify, a lender will thoroughly examine your finances. After the inspection, you’ll receive an estimate of how much money a lender may be willing to give you based on your income, credit, and current debt. It’s important to note that even though you prequalify for a mortgage from a specific lender, you’re not exclusively committed to them yet. You’re still free to shop around for better interest rates, but having that prequalification letter will significantly improve your chances of closing a deal on the property you want.
Get the right mortgage for your budget
There are two main types of mortgages: fixed-rate and adjustable-rate. The main difference between the two is the way their interest rates are determined. The interest rate for fixed-rate mortgage loans is determined when you take it out, and it will not change. An adjustable-rate mortgage, on the other hand, has an interest rate that may fluctuate after the introductory period ends. Fixed-rate mortgages allow for easier budgeting, but adjustable-rate mortgages offer more flexibility when it comes to refinancing. Ultimately, the type of mortgage that’s right for you will largely depend on your budgeting preferences.
Avoid 30-year mortgages
30-year mortgages attract many home buyers due to their lower monthly payments. In the long run, however, you’ll end up paying tens of thousands of dollars more in interest than if you choose a 15-year fixed-rate mortgage. As such, you should try to choose a mortgage option with a shorter timeline.