Getting a Mortgage
Let's start with the basics. A mortgage is nothing more than a loan that you obtain to close the gap between the cash you have for a down payment and the purchase price of the home that you're buying.
Fixed or Adjustable?
Like other financial and investment products, there are many different mortgage options available. Two fundamentally different types of mortgages exist, and they differ in terms of how their interest rate is determined.
Fixed Rate Mortgages
Because the interest rate does not vary with a fixed-rate mortgage, its advantage is that you always know what your monthly payment is going to be. Thus, budgeting the rest of your personal finances is easier.
Adjustable Rate Mortgages (ARMs)
Adjustable mortgages (ARMs) fluctuate with the market level of interest rates, and so does your monthly payment. Because this is likely to be a big monthly expense, an ARM that is adjusting upwards may wreak havoc with your budget.
15 or 30 Year Terms
After you've decided which type of mortgage - fixed or adjustable - you also need to make another important choice - typically between a 15-year and a 30-year mortgage.
Points are up-front interest, and points cost you money. Lenders charge points as a way of being paid for the work and expense of processing and approving your mortgage.
Others Lenders Fees
There is no shortage of up-front loan-processing charges for you to investigate when making mortgage comparisons. Understanding all of a lender's other fees is vital - after all, they come out of your pocket.
Locating a Lender
Whether you do the footwork on your own or hire someone competent to help you doesn't matter. But you must make sure that this comparison-shopping gets done.
Traits of Good Lenders
Real estate agents and others can serve as useful references for steering you toward the top-notch lenders and away from the losers. As you solicit input from others and begin to interview lenders, seek to find lenders with the following traits.
Loan Prequalification and Preapproval
Getting preapproved is a sign of your seriousness to house sellers - it places a Good Borrowing Seal of Approval on you. In a multiple-offer situation, buyers who have been preapproved for a loan have an advantage over buyers who don't.