Buying a home is something that every adult usually starts to think about the moment they land a decent job. Finding the right house may be challenging, but there are real estate agents to help with the search. What may be more challenging is finding affordable financing. There are many home loan companies in the industry, and they all claim to offer mortgages that are the best in the industry. Therefore, it is upon consumers to do their own research and make their own informed decisions. The first thing that people usually do when they want to apply for a mortgage is compare interest rates to identify the most affordable lenders. However, there are many other factors that should be considered, including:
i) Mortgage Insurance Premiums
Loans are usually insured against the risk of default. Lenders usually charge mortgage insurance premiums as a percentage of the loan value. The premiums usually differ from one company to the next as well as from one borrower to another. To get the lowest premiums, you should consider paying a bigger down payment, of say 20% of the property value.
ii) Down Payment Required
Some lenders may offer over 100% financing, while others only offer up to 80-95% financing. Whatever the case, it is crucial for consumers to check the minimum acceptable down payment quoted by different financiers. This will help to inform their decisions. If you can only afford 5% of the property value, then you should look for lenders offering 95% home financing and so on. However, if you have saved up a significant amount of money, consider paying as much as you can. By paying a bigger down payment, you will pay less interest towards the home loan. You’ll also get a lower rate of interest and finish paying the loan faster.
iii) Upfront Costs
Before getting a mortgage, you’ll realize that there are a number of upfront costs, such as legal fees, insurance premiums, taxes and the likes. Be sure to compare the upfront costs charged by different firms because you want to get the most affordable loan on the market.
How to Find Low-Interest Home Loans
Everybody wants to get a cheap mortgage, but they do not know how. The key to finding a cheap mortgage lies in knowing the factors that affect interest rates. Credit scores, economic conditions, deposit paid by the borrower and lender’s profit margin are some of the key factors affecting interest rates. If you have a superprime credit rating and a decent down payment, you can expect to get dirt-cheap home loans when economic conditions allow. Similarly, if you have bad credit and a small down payment, you may have to make due with an unreasonably high rate of interest. Whatever your financial situation, the following tips can help you find lower home loan rates:
1. Shop Around
It is crucial you do some research to get accurate information about the rates of interest charged by the top lenders in the industry. this is crucial because interest rates usually differ from one lender to the next. By shopping around, therefore, it will be possible for you to find the most affordable home loan on the market. Be sure to also pay attention to other loan terms and conditions to ensure there are no hidden charges. After all, a lender may offer a mortgage rate that is much lower than what other lenders are offering, but they may charge unreasonably high insurance premiums, processing fees and other closing costs.
2. Consult a Mortgage Broker
The key to finding the best home loan for your needs lies in consulting a competent mortgage broker. There are many of them in the industry, so be sure to make a list of licensed mortgage brokers with a lot of experience in the industry and a great reputation. Only independent brokers should get any consideration. Brokers have the time, skills and resources needed to scan the home lending market to identify the best home loans for your unique financing needs. They can save you a lot of time and money, so you need to consult a reputable broker. The broker can also explain all the technical terms and legal jargon to ensure you have a better understanding of the mortgage contract. They’ll also help you fill the necessary forms to ensure you do not make any mistakes that may lead to rejection of your application or unnecessary penalties. A mortgage broker can also assess applicants and prequalify them for a specific loan amount. This can help home seekers in their home search.