Answering Home Loan Questions

We can’t all be so lucky to be independently filthy rich or to have won the mega millions. Which means that, when you’re buying a home, chances are you’re going to need a mortgage loan. If this is your first time at the rodeo, you may have some questions on convincing a bank to just let you borrow hundreds of thousands of dollars. Here are some of those questions.

Who Should You Work With?

Financing a home isn’t as simple as just calling a bank. Among all the other decisions you’ve had to make in the homebuying process, there’s yet another. You should weigh the options between getting your mortgage through a bank or hiring a mortgage broker. Typically, most people end up just going with the bank where they do their primary, day-to-day banking. It may seem like an extra step to go with a mortgage broker but they really do a lot of work for you. A broker will negotiate with lenders on your behalf. They charge a fee but may end up saving you more money than they cost.

Even if you don’t hire a mortgage broker, at least shop around with different lenders. At the very least you may score a lower interest rate!

What Type of Loan?

The two main types of loans are fixed-rate and adjustable rate mortgages. Deciding which type to go with can be as simple as factoring in how long you plan to live in the home.

For predictable payments that don’t change, go with fixed-rate. As the name implies, the interest rate is fixed and will remain the same for the life of the loan. An adjustable rate mortgage (ARM) is a little different. They have an interest rate that is fixed for a short period of time and then adjusts at regular intervals to reflect the current market. This means your payment will change over time.

Why would you opt for an ARM? Generally, the starting interest rate on an ARM could be a full percentage point less than a fixed-rate loan. This could add up to really big savings during that initial time frame when the ARM is first fixed. If you aren’t planning on staying in the home for the long-term, an ARM might make total sense.

When numbers start spinning and things start getting confusing, always remember you can go to your Realtor. They are there to reassure you and answer questions. If they don’t have an answer immediately, any Realtor worth their salt will surely FIND the answer for you. Let them help you with your home loan questions!

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