Did you know that last year mortgage approval hit a record high? With a booming property industry, more people than ever are getting on the property ladder.
But when it comes to loans, what should you be looking out for?
If you have just managed to get your deposit and are ready to make the next move, we can help. Read on as we discuss five factors to consider when picking home loans.
- Your Budget
Knowing your budget is not just about your current circumstances. You need to try and predict future events that may impact your finances. For example, do you plan on starting a family or going back to education?
You will need around a 20% down payment on the property, though this may be negotiable with some lenders. The longer your payment terms, the lower your monthly payment will be. However, you will be tied into the mortgage for a longer period of time.
The opposite is true as well. If you can foresee no financial barriers, opt for a shorter-term loan. While your monthly payments will be higher, you will pay the loan off quicker and incur less interest.
- Know Your Rates
The options for loans are fixed and variable rates. When comparing loan costs, the most simple ones are fixed rates. You agree to a percentage of interest on the loan which is paid back with each installment, and this does not change throughout the loan period.
Variable rates are ones that change depending upon the interest rates. You could end up paying more or less, depending upon the economic climate.
A good middle ground is an adjustable rate. They have a fixed period for around the first ten years. After this, the rate will fluctuate in the way a variable rate mortgage does.
- Research Lenders
When it comes to loans for buying homes, not all lenders are the same. There are multiple places you can choose to get the best deal and terms for yourself, such as credit unions and correspondent lenders.
This article source can give you more information on the benefits of opting for a private lender.
- What Other Fees Are You Responsible For?
In addition to your down payment, you will be responsible for a number of other fees. These can include commissions, appraisal fees, and credit reports, to name a few.
Request a loan estimate from the lender when comparing loan costs to see what you will be liable for. Also, be sure to read the fine print that explains the loan term and conditions.
- Get Pre-Approval
A letter of pre-approval is a confirmation from loan providers that you meet the criteria to get a loan with them. It is usually specified up to a certain amount.
It gives you an advantage when buying a home over other potential buyers. Why? It shows that you are already in the loan process and can get the required amount.
Final Thoughts on Picking Home Loans
In summary, when picking home loans, start the search early.
Shop around for the best deal for you, based not just on the interest rates but including other factors such as fees. Finally, make sure you get pre-approval when the property search begins.
If you enjoyed our article, we have many more to help. From saving advice to DIY, let us help you settle into your new home!
