The mortgage option that you choose will be an important aspect of your life for the next years. There are many variables to take into account before making this decision. Let's find out which mortgage is the most suitable for you.
The first thing you’ll need is a preapproval letter. Your finances and credit will be looked into, so as to see if you can pre-qualify for a mortgage. The lender can tell you how much money you’d receive and under what terms. This letter is a powerful tool to start looking for a mortgage, since it’ll make you stand out from other applicants.
Secondly, you have to define the down payment. Usually, people put 20% down, but there’s a wide range of options, even as low as 3% down! Keep in mind, putting down less money as a down payment means a higher cost later on, as well as paying for a mortgage insurance. Even if you can’t afford such down payments, there are some loans that might help you. You can look into Conventional mortgages, FHA and VA loans and see if they’re suitable options for you.
You can choose between a short- or a long-term mortgage. The difference is in the mortgage payment you’ll have to put down monthly and in the interest rates. You should compare a 30-year and a 15-year fixed mortgage in order to see what’s best for you. Additionally, an adjustable-rate mortgage has flexible interest rates, which has its cons and pros. On one hand, you’d be taking a risk. On the other hand, it ensures a low interest rate for the first years of your mortgage.
Lastly, you should compare mortgage rates and fees from three or more lenders. Some of them allow you to buy so-called “discount points”, which lets you prepay interests. This way, you’d guarantee a lower interest rate on the loan.