As with any significant financial decision, before you commit to any single mortgage loan, shop around and compare. There are many, many companies that offer mortgage loans — banks, credit unions, mortgage companies — and each is different from the other. Don’t commit to the first loan you’re offered, even if it seems reasonable. You may consider using a mortgage broker. Someone that can find a lender for you, as well as compare brokers too. A broker charges a separate fee; each broker, like each lender, has a different fee and a different way to collect the fee.
What should you look for in a mortgage loan? Much like other types of loans, the interest rate is the most significant variable. Ask if the rate is fixed (meaning it will stay the same for the duration of your loan) or adjustable (meaning it can go up or down during the duration of your loan). The other big cost comes in the form of many smaller costs, called “fees.” Be sure to talk to your lender or broker about loan fees. Some are due before you apply, and some are due at closing. Some loans are called “no cost” loans, which means that they do not have fees. However, no cost loans usually require higher interest rates and, consequently, higher payments.
In most cases, the lender or broker will require a down-payment before you can take out a loan, an amount that averages twenty percent of the purchase price. If you are not required to put down a twenty percent down-payment, you will likely need to purchase private mortgage insurance to protect the lender if you do not or cannot make your payments.
Home buying can be a stressful time, but by making wise choices and thoroughly exploring your options, you can help to make it — relatively — stress-free.