When it is about time to take the idea of buying a house through home financing seriously, you surely would want to get everything right and make sure that you are able to find the best deal without going through difficulties. But how would you do it?
Shop around. Do not settle with the first financial institution you come across.
There are lots of financial institutions you can apply from. Each promising unique deals that will surely attract you – each, promising a deal that perfectly works for you. If you do not know what you are doing, you will be easily persuaded by the first home financing representative you talk to. Avoid this at all cost, especially if it is very apparent that the deal is going on your best interest. Remember, you are not obliged to make a final arrangement with any financial advisor. What you have to do is to talk to several home financing companies and discuss your plan for home financing. Competition is stiff in this business so companies try to offer competitive deals, including lower interest rates and better terms. If you look around, you will be able to find the best deal.
Remember: there is no such thing as universal home financing term fit for everyone.
You are the only one who knows what type of home financing term fits you. Coordinate with your loan advisor which type of loan is perfect for you. In the end, if choose correctly, the loan you took is the least of your problems.
Do your research.
Borrowing money is not a favor you ask to lenders. Take note that they also profit from you. If you end up taking loan with a wrong company, you may have to suffer severe consequences resulting from hidden charges and missed repayments. Making sure that you find the most reputable lending should be in your high priority list. Compare different lender and identify which among them is the most reputable one.
Consider your future plans.
Are you planning to stay at your home for a very long time? Or, are you planning to refinance your home or move out after several year? Do you have enough money to pay for higher mortgage for a shorter period of time?
Home mortgage can be 15- or 30-year fixed rate mortgage or adjustable rate mortgage or ARM. These two have their own pros and cons. To get the best deal, consider your future plans. A fixed rate mortgage will let you plan for the monthly payment of the house better since the amount you pay will not change throughout the loan term. Taking a 30-year fixed rate mortgage will work for you if are planning to stay at the house indefinitely. A 15-year fixed rate mortgage on the other hand is ideal for people who can afford higher mortgage and want to significantly reduce the interest rate they pay.
The adjustable rate mortgage or sometimes called hybrid loan adopts the fixed rate mortgage at the beginning of the loan and will adjust after the fixed rate period expires. For example: the 5/1 loan has a fixed interest rate for the first 5 years. The rate will adjust every year after that. People who plan to move out or refinance the home after several years within the loan period often find ARM effective.
Anticipate the interest rate adjustment.
Getting the best deal also lies on your anticipation on the future interest rate basing on the current trend. During recession, the interest rate can go down which is very advantageous for those who take ARM. Still, taking ARM has a great risk involved. The interest rate can jump by several percent in just one year. But those who take the fixed rate mortgage will enjoy the same amount of mortgage regardless of the jump of interest rate. The point is, you can capitalize on looking at the trend interest rate to get an idea of what type of loan to take.
We mentioned a while ago that the competition is stiff in this business. Use it as your advantage and negotiate your terms to every lender representative you talked to. Do not get tired of this. Persistence is the key. And before you know it, you have found the best home financing deal that fits you best.