Buying a home is a big commitment, and finding the right properties along with the right low rate mortgages can often seem like an impossible match. But between the rise of the U.S. mortgage market in 1949 until the turn of the 21st century, people have been becoming homeowners through all sorts of mortgages. There are many requirements. A large percentage of lenders require a minimum credit score of 680, which can be a challenge for people with bad credit, and on average, one will need at least a 3.5% down payment. But, first and foremost, one must ask several important questions before you sign onto a mortgage:
Adjustable vs. fixed rate?
Should you get an adjustable or a fixed rate mortgage? That is the question. Fixed rate mortgages will lock you into a consistent interest rate for the entire life of the loan while the interest rate on an adjustable-rate mortgage will fluctuate based on an interest rate index chosen by the bank. When considering your options, you must remember that although the interest rate on an ARM might be lower for the first couple of years, it could rise significantly later on.
Besides the down payment, how much should you be expecting to pay in closing costs? Usually, you should plan to have about three percent of the purchase price available for closing fees. These can be charges from lenders for the underwriting and processing, title insurance fees, and appraisal costs, among many others. Shopping around for the right lender can help you minimize these closing fees.
Don’t hesitate to take advantage of special programs if you are applicable! If you or your spouse are active military members or veterans, you may qualify for a VA loan. These allows for low down payments and offers protections if you fall behind on payments. FHA home loans also allow low down payments and are forgiving of low credit scores. You may qualify for USDA loans if you live in a rural area, and there are several first-time home buyer programs.
Low rate mortgages for the perfect homes are not unattainable — it just takes a lot of shopping around to compare mortgages and careful consideration. There are many different types of home loans out there — but don’t worry. There is one out there for you.