What is the first decision to consider for a mortgage loan?
The first step is to determine the type of mortgage you want. Do you want an adjustable-rate mortgage (ARM), or do you want a fixed-rate loan? The difference is that an ARM’s rate can change over time after an initial fixed period. A fixed-rate loan is fixed for the entire term of the loan for whatever term you decide. ARM rates are usually lower than fixed loan rates initially, leading to lower monthly payments in the beginning for ARM loans. Choosing the best option for your situation requires considering several factors, including how long you plan to stay in the home.
Are there other options to consider for mortgage loans?
Another option is whether to pay points or fees to lower your rate. When you opt to pay upfront fees, lenders will lower the interest rate, which can lower your monthly payment amount. You also need to consider how long your rate can be locked once you are approved. The rate might be higher, or there might be a fee for a longer rate lock term. A final option to consider is the amount of down payment you will need, which can be as low as 3% for some loan types. If you have 20% or more for a down payment, you can possibly avoid paying private mortgage insurance (PMI).
How can you avoid a mortgage loan being stopped at or within a week of closing?
Don’t take out other new loans after being pre-approved for the mortgage loan because it can lower your credit score. Most lenders require a recent credit report, and the new score could disqualify you for the mortgage. This is one of the main reasons mortgages are stopped at or near closing. A good rule of thumb to follow is not to make any drastic changes to your financial situation while attempting to buy a new home and being approved for a mortgage.