Being a first-time homebuyer is tough. You will likely pay back your mortgage over an extended period. Unless you can buy your new home entirely in cash, finding and choosing the best type of mortgage can be challenging.
That’s why it’s essential to choose a loan that meets your individual needs and budget. You’ll also need to know today’s mortgage rates and understand a bit about each type of loan. Below, we’ll discuss what you can do to find the best rates.
Learn About the Different Kinds of Mortgages
There are many types of mortgage loans available, and it can be overwhelming to choose between them. There are different mortgage rates currently available to suit all home buyer’s needs. Here are some of the basics:
- Conventional fixed-rate mortgages are best for borrowers with a good credit score.
- Adjustable-rate mortgages work best for borrowers who do not plan to stay in the home for a long period and are comfortable with the risk of larger payments down the road.
- A balloon payment mortgage is a financing option that includes a lump sum payment that you can schedule for any point in the term.
- Rental property loans are a great option for investors looking to own a second property.
Use a Mortgage Calculator
Many people find a home they love and then try to get approved for a mortgage – only to find they’re not approved for the financing they need for that particular home. Other homebuyers get approved for a mortgage that covers the cost of the house but find themselves struggling to make ends meet because they failed to consider extra expenses related to homeownership.
Using a mortgage rate calculator can give you complete confidence in what you can afford, so you won’t commit to owing more money than your income can support.
Improve Your Credit Score
Your credit score directly impacts your ability to get approved for financing. Often, to get approved for a mortgage, you need to have a good credit score. Higher credit scores demonstrate to lenders how likely you are to pay back your debts on time; this, in turn, will help qualify you for a mortgage.
Know Your Debt-To-Income Ratio
In addition to your credit score, your debt-to-income ratio is important to consider. Your debt-to-income ratio compares how much you owe each month to how much you earn. Being aware of how much money you’re making vs. spending helps put into perspective what you can afford when applying for a mortgage loan.
Consider Interest Rates and Closing Costs
When financing your forever home, you’ll want to look for the lowest rate possible to avoid overpaying as you pay back your loan.
Low closing costs usually come with a higher interest rate than is available on the market. That can be beneficial if you’re looking to resell your home within the year, as you pay a lower interest rate. Overall, what you choose depends on your financial needs.
Contact Axiom Mortgage Solutions Today
Regardless of which type of loan you choose, making an informed decision is crucial. Securing your financing before you get serious about looking can be advantageous. It lets you act quickly to make an offer, and you are taken more seriously by sellers if you have a pre-approval letter in hand.