When you’re ready to invest in a home, you’ll get the same piece of advice from just about everyone…
“Make sure you shop around for your mortgage.”
It’s a solid recommendation that you should definitely follow, but many potential homebuyers have absolutely no idea how to begin. Unless you’ve comparison shopped the mortgage market before, exactly how you go about finding the best lender for you is a compete mystery. At Ernest Signature Custom Homes, we want to make sure that everyone involved in the home financing process is completely prepared to tackle this important task. We’ve put together a handy “cheat sheet” that outlines the steps you need to take to find the mortgage that best fits your needs.
- Decide which type of mortgage is best for you.
There are three general types of mortgages; the fixed rate, the adjustable rate, and the balloon payment type. Fixed mortgages have one interest rate for the duration of the loan. This type of mortgage is best if you have to work within a strict monthly budget and need to know exactly what your housing costs will be each month. An adjustable rate mortgage usually attracts buyers with a lower interest rate, but the interest rates can change several times during the life of the loan, depending on current market factors. If you tend to keep a good-sized emergency fund available to handle unexpected changes in your interest rate, you may want to consider this type of loan. A balloon payment loan has a lower monthly payment, but at the end of the loan, a much larger payment will be due. This type of loan works well for people who know they will be relocating within a relatively short time (say, five years) and will be selling their home before the large last payment comes due.
- Choose the length of the mortgage.
Mortgages are usually available in 15, 20, 25 or 30 year periods. The shorter the lifespan of the loan, the higher the monthly payment. Carefully weigh what you can afford to pay per month versus the amount of time you’ll be making the payment. If you want to be debt-free more quickly, choose the shortest possible option you can comfortably afford. If you want to have more disposable income for other things, stretch out the term of the mortgage.
- Make your point.
If you plan to be in your new home for a good many years, consider “buying down” your interest rate by paying points. Paying a point – a specific percentage of the loan amount – can drop your interest rate significantly, which can save you money over the length of a longer term loan. If you don’t want to cover the cost of the points out of pocket, you can add the fee to your loan balance.
- Check your credit.
We won’t labor this point – it’s the part of getting a mortgage that always gets the most attention. Make sure you’ve done all you can do to make your credit situation appealing to lenders. The closer your FICO score is to 800, the more negotiating power you will have with a lender.
- Start close to home.
Check rates first with financial institutions where you have active accounts. Banks, savings and loans and credit unions you already use may have programs in place for existing customers that will save you money.
- Turn to the experts.
Enlist the help of a mortgage broker to find excellent rates. Get recommendations from family, friends and coworkers who have bought a home in your area, and read reviews online before making a choice. Mortgage brokers are “wholesalers” who work with many different lenders and can do some of the more tedious legwork for you when it comes to comparing rates.
- Work with your builder.
When buying new construction, be sure to ask your homebuilder about preferred lenders. Most builders have connections with lenders that can make getting a mortgage a much easier process. At Ernest Signature Custom Homes, we work hand-in-hand with several lenders who will find the best way for you to finance your dream home. If you have questions about your mortgage, they’re here to help!
Fidelity Bank Mortgage
912-692-8022 Ext. 7189
State Bank & Trust Company
912-663-2510 Cell (Best Contact)
Eric Glick, Sr. Loan Officer
- Follow-up for best results.
Once you’ve gotten your mortgage lined up, make sure you take a look at your closing costs. They can vary widely from lender to lender and can add a significant chunk of change to your financing. On average, closing costs will run from 3 to 6 percent of the total cost of the mortgage. If you can run your mortgage through a credit union, these lenders usually give you a better deal on your closing costs. You’ll also need to review your good faith estimate carefully. This detailed breakdown of all the costs associated with your mortgage will give you an accurate picture of exactly where your money is going.
With a step-by-step plan in hand, you can not only find the mortgage that’s best for you, you can reduce the levels of stress and anxiety many people experience when searching for a new home. If you have any questions at all about shopping for a mortgage, don’t hesitate to contact our team. We’re always here to help you find the answers you need. Drop us a line via email or call our team at 912-756-4135 today!