Did you know that approximately 6 million homes are sold annually in the US? Owning a home is a dream for many people, but few people can save enough money to buy a home without the help of a home loan.
The process of choosing home loan providers is stressful, and many people don’t know where to begin or go with the first lender they come across.
If you’re feeling a little lost with the process, keep reading to learn four factors you’ll need to consider when searching for the right home loan provider!
1. Look at Interest Rates
When considering your options for loan providers, one of the first things you need to ask about is the current interest rates they’re offering.
There are two types of interest rates available: variable and fixed rates. A variable-rate fluctuates based on the level set by the Federal Reserve. You can end up paying a lower rate this way as long as the interest rates are low, but keep in mind the Federal Reserve changes this rate eight times a year.
A fixed rate remains the same for a specific period, but your loan provider will set the interest rate when that period expires.
2. Check the Loan Terms and Conditions
Next, you’ll need to carefully research the loan terms and conditions for different lenders.
For example, some loans charge additional fees such as initial application fees, ongoing fees in addition to your regular interest rate, and prepayment penalties should you pay your loan off early.
Remember, these costs can really add up over time, and you’ll be paying much more for your home than you realize, so checking the loan terms is a crucial part of comparing loan costs.
3. Check Loan Eligibility Criteria
You’ll want to check each lender’s eligibility criteria for home loans carefully. These requirements can vary for each lender but usually revolve around your monthly income, age, and credit score.
Many lenders also require you to have a certain amount of money for a down payment. For conventional loans, you’ll need to put down at least 20% of the purchase price, while other loans may offer down payment assistance programs.
4. Consider a Mortgage Broker
You can think of a mortgage broker as one-stop shopping for mortgages. Mortgage brokers have access to many different lenders and types of loans and can match you with a lender that’s best suited to your financial situation.
Instead of searching for different lenders yourself, you’ll typically only need to meet with a mortgage broker once, and they will take all your documentation to streamline the process.
The lender also compensates them, so you don’t have to pay any fees for their services. You’ll also find they have access to lower interest rates and can give you solid financial advice.
If you’re interested in using a mortgage broker, you can get an excellent general overview of this process here.
Choosing Home Loan Providers
Remember, when choosing home loan providers, it’s vital to ensure you’re well informed throughout the entire process.
Remember to do your research by reading online reviews, and don’t be afraid to ask plenty of questions so you’re comfortable with the lender and loan terms you choose.
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