Finding An Affordable Mortgage Rate

Finding an affordable mortgage rate for your new house or to refinance your existing house is a relatively simple process. All you need to do is to avoid some common pitfalls by following a few simple steps:

Step 1: Document Your Needs

You need to ensure that you are aware of your spending ceiling to make sure you do not go beyond your budget. Also identify how much you can afford to pay as a down payment, and the monthly amount that you are willing to allocate towards your mortgage payment.

Step 2: Research

There are several thousands of companies and agencies that will offer you advice and research on mortgage but what you do yourself is the best and most trustworthy source of information. Talk to friends, talk to your bank, discuss with your financial planner or advisor – and gather as much information as possible.

Step 3: Compare

It is important to talk to several lenders. Compare their rates, lending costs and repayment options. Compare financial institutions against private lenders. In most cases you will find private lenders to be better than a large financial institution, but they may have related fees that you need to factor in. Make sure you are aware of some key aspects when you compare your options:

Fixed vs. Variable

People generally tend to favor the fixed mortgage rate as they feel that the mortgage rates tend to rise. You should be aware of the prime rate and research the outlook of the prime rate and mortgage rate trends before making this decision. If the prime rate is expected to go down, you may want to consider having a variable rate mortgage.

Mortgage Amount & Monthly Payments

It is always a good idea to download a mortgage calculator from the Internet to verify the rates and monthly payments you see on your offers. Some lenders may build in additional fees into the mortgage payment that you may not notice upon initial examination.

Majority of lenders will vary the mortgage rate depending on the amount being borrowed. Some financial institutions may charge a higher rate of interest on amounts exceeding a certain limit. Make sure you are aware of any restrictions on the contracts you are evaluating.

Down Payment

The amount of deposit that you put towards the mortgage may assist in getting you the best bargain out in the market. You should be aware that a down payment of less than 20% of the value of the house would result in an additional burden of mortgage insurance premiums on top of your monthly mortgage payments.

Step 4: Make Your Choice & Confirm Your Eligibility

Your credit rating plays a crucial role in ensuring that you are eligible for the mortgage you want to secure. Once you have identified the best mortgage offer available, you should ask the financial institution to run your credit check and ensure that you fulfill any other criteria that they may have for eligibility.

Step 5: Obtain Your Mortgage

Once you receive your credit approval, you are ready to purchase your house.

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