October 22nd, 2019 9:01 AM by Jackie A. Graves, President
There’s no place like home – but to own one you’ll need to
choose the best mortgage rate.
First-time homebuyers can
save more than $3,500 over the first five years on a home loan by comparing
mortgage rates from at least three different lenders, according to the Consumer
Financial Protection Bureau.
“It’s important to invest time in comparing. You might need
to spend an hour or two making phone calls and seeing what you qualify for.
Don’t just go for the first mortgage rate you get,” Kimberly Palmer, a personal
finance expert at NerdWallet, told FOX Business.
Here’s how to choose
the best mortgage:
Your credit history is how lenders determine your
mortgage interest rate. So be sure to check your credit for any potential
errors, and do your best to make payments on outstanding debts like student
loans or credit card bills before you start applying for mortgages.
“Try to get your score as high as possible because that will
help you qualify for lower interest rate,” Palmer advised.
Types of mortgages
First-time homebuyers can
typically choose from two main types of mortgages: a conventional loan, which
comes from a bank, credit union or private lender or a government-backed loan.
New homebuyers who will typically qualify for a conventional
loan must have good credit (some lenders can go as low as a 620 credit
score) and can expect to put down at least 5 percent, according to
NerdWallet. Terms can typically range from 15 to 30 years.
If a home buyer has good credit but does not have a lot in
savings for a down payment, they could see if they qualify for a
Federal Housing Administration (FHA) are loans that allow down
payments as low as 3.5 percent of the purchase price. VA loans, on the
other hand, insured by the Department of Veterans Affairs, offer buyers low or
sometimes no down payment options. VA loans are offered only to
current military service members and veterans.
USDA loans come from the U.S. Department of Agriculture and are
offered to rural property buyers who meet income requirements.
Getting pre-qualified means a lender will take a look at your
finances and say how much it’s willing to lend you and outline the terms.
First-time buyers can have the upper hand over others if they have a
preapproval letter when applying for a home.
least three quotes and compare both rates and fees. NerdWallet suggests asking
lenders if you can buy discount points, or prepay interest upfront to get a
lower interest rate on your loan.
Fixed-rate mortgages mean the interest rate will stay the same
throughout the term of your loan. Currently, the average rate on a 30-year
fixed mortgage rate is 3.56 percent, according to Freddie Mac. This is one of
the most popular types.
Fixed-rate mortgages typically tend to have a higher interest
rate than adjustable-rate mortgages, which have low, fixed rates for a short
period of time (usually three to seven years) before they reset. These types of
rates are usually more appealing for young homebuyers who may not plan on
staying put for more than a few years.
Source: To view the original article