Finding a mortgage loan can be the most stressful part of buying a new home. Your budget, available interest rates, lender reliability and being approved are all equally important in the search for the best loan for your budget. Fortunately, with a little research, understanding what you need and how to find a loan to match your needs can be easier.
Learn Mortgage Basics
The first step in searching for the best loan for your budget is to learn the basics of mortgages and lenders. A mortgage is money borrowed from a bank, the lender or mortgagor, and given to the borrower or mortgagee for the purchase of a property, typically a residence. Usually, the lender will require the borrower to possess and pay a certain percentage of the value of the property, typically anywhere between fifteen or twenty percent. The lender is not providing funds simply from good-will, though, but because of the interest payments it will receive from the borrower. The amount of interest rate can vary based on the borrower’s income and credit score, the length of the loan, the longest of which is thirty years and the value of the property.
Consider Your Circumstances
Buying a home is filled with unexpected costs. Taxes, Realtor fees and closing costs can often take a homeowner by surprise. The amount of interest you can afford on a monthly basis must be factored into the amount you can spend on a home. In other words, do not forget about the fact that mortgage interest will increase the amount of your monthly payment. A higher than required down payment will decrease the amount of interest paid simply because it will lowers the amount borrowed, but even in this case interest payment should not be ignored.
The Value of a Mortgage Broker
A mortgage broker is a professional that works as a liaison between the lender and borrower. Often, a mortgage broker will have access to information from several different lenders and be able to check all at once for the best deal for a borrower. Typically, a mortgage broker is paid by the lender and costs nothing to the borrower, but always check with the broker to make sure this is in fact the case.
Asking friends and family is often the best way to find a reliable and trustworthy mortgage broker. These qualities are essential when working with a broker, and if you get a sense that either or both are not present do not work with that broker.
Most importantly, though, do not sign anything agreeing to working exclusively with any particular broker. Since you as the borrower will not pay the broker there is no benefit to you to limit working with one broker or promising to not look for the best mortgage deal by yourself. If a broker refuses to work on your behalf without such a agreement, find one who will.
They key to finding the best mortgage loan for your budget is to shop around for the lowest interest rate. Online companies may enable you to contact several lenders with the click of your mouse, but you may be able to receive a lower rate by calling a company directly.
Also, do not be afraid to negotiate. While you may not receive a lower interest rate, it never hurts to ask, and you may be surprised at the lender’s willingness to work with you, particularly if you have steady income and a large down payment.