Choosing Your Mortgage

Mortgage |

Questions to Ask Before You Buy a Home

Buying a home will likely be the largest purchase you’ll ever make – so it’s important to go into the process with solid facts. Start by answering some fundamental questions to assure you end up with a house you can afford and terms you can manage:

How Much House Can You Afford?

Embarking on a home purchase is daunting, and setting realistic expectations early on is critical. A common rule of thumb is that no more than 28% of your gross income should go toward housing costs, but your situation may vary depending on your location and personal circumstances. Try a basic online mortgage calculator to get a general idea of what you can afford, along with talking to a trusted local banker or mortgage officer.

What About Your Down Payment?

The more you can put down on a home up front, the lower your monthly payments and eventual interest paid will be. In addition, you’ll need money for closing costs and other up-front expenses associated with buying a house. Think about any savings or investments you have that could realistically and responsibly be used toward a down payment, or consider holding off on a home purchase until you can save up.

How Long of a Loan Makes Sense?

While most mortgages these days have a 30 year term, loans with 15 year, 10 year, and other timeframes are also available. A 30-year mortgage loan will give you the lowest monthly payment, while shorter term mortgages generally present lower interest rates as well as interest savings over the life of the loan.

What Kind of Mortgage is Right for You?

There seem to be as many kinds of mortgages as there are people who buy homes. In fact, the topic warrants an article of its own. Options include conventional mortgages, adjustable rate mortgages, Federal Housing Administration loans (FHA loans), first time home buyer loans, United States Department of Agriculture loans (USDA loans), Veteran Benefits Administration loans (VA loans), and jumbo mortgages – and that’s just the beginning. Do your research and talk to an expert!

What Interest Rate Will You Qualify For?

Interest rates on mortgages change on a daily basis, and the interest rate you qualify for will depend on multiple factors, including what kinds of loans you are eligible for and your credit standing. Fixed rate loans can have slightly higher initial interest rates when compared to adjustable rate mortgages (ARMs), but the percentage on an ARM will go up or down depending on market conditions after an initial term of three, five, or more years. As always, getting advice from mortgage professionals can serve you well.

Where Will You Secure a Mortgage?

It’s a good idea to shop around for a mortgage – check out at least three banks to see what they can offer you. Whatever mortgage provider you choose, go with a bank with a trustworthy reputation and proven record of providing secure financial services.

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