The mortgage market is still sick showing no improvement in its rate. As per the reports of St. Louis Federal Reserve, the rate is below 4%, if you go for 30 years of fixed mortgage. Banking professionals believe that a little change can breathe some life into it. Consequently, they have made the loan-sanctioning procedure easy while broadening its types simultaneously. With the new options replacing the old ones, the banks have started promoting mortgages with flexible rates to draw in attractive terms.
Today, when you go to bank, they will hand you a list defining types of interest rates concerning mortgage. Being a novice, you may find it difficult to pick the right one without your financial planner’s advice. That’s why, we have shared with you different mortgage rate types so that you can arrive at a right decision without spending money.
Compare the Mortgage Rate
Once you get your dream home, you are likely to send to the preferred lender of your selected real-estate agent. It’s actually your wish, you may or may not contact him. Keep it in mind that, your agent will do his best to close the agreement at the earliest. But, as getting a mortgage loan is a complex procedure, you should compare rates of multiple deals to grab the best one.
If you’re a first-time homebuyer, consider Fixed Rate Mortgages. Calculate the amount you need to pay monthly and accordingly frame your budget. Just like its name, its rate of interest is fixed and will remain so throughout your mortgage period. However it has one demerit. Once you opted for it, you won’t be able to avail the benefits of lower rates in case the rate of interest goes down.
Similarly, the counterpart of Fixed Rate Mortgage, Adjustable Rate Mortgage has both merits and demerits. If one one hand, it is letting you to draw benefits from its low rates, on the other hand, it will compel you to pay more when the rate rises.
Gather More Credit Score
Planning to apply for a conventional loan? Give utmost importance to the credit card score. The more the score is, the lower the rate of interest will be. Additionally, the door of options will be open to you.
Consider Your Staying Period
Adjustable-rate mortgage or ARM will be beneficial for you in case you have planned to stay in your newly bought house for a short period. It’s because you will be free to avail the low interest rates of ARM and sell the house prior to resetting of the rate.
If you think ARM is a risky choice, you can go with shorter-term fixed rate mortgage. By opting for it, you can enjoy low interest rates while paying a big amount every month. Finally, you will see that it has one of those types of interest rates that lowers the overall payable amount faster.
Here, you just have to pay interest on the mortgage for a short period. The rest of the taken loan amount is payable by the borrower either by refinancing or by paying a huge amount every month. As you are not paying anything initially, the final amount becomes pretty big.
When you prefer Balloon Mortgage, you are required to pay negligible sum initially, I.e. from 7-10 years. But after the ending of your initial period, the amount you have to pay will take quite a big shape. You are bound to pay the remaining amount at the end.
Find Trustworthy Mortgage Lender
Read the reviews of the home loan lenders carefully. Always consider the latest reviews. Ask for reference to those friends and relatives who have recently purchased houses to get in touch with a local lender. If you find that the lender you are trying to contact to is taking huge time in picking up your call, take it as the red flag.
Apart from it, your selected lender should be ready to clear all your queries without hesitating. He should not make you feel uncomfortable while you’re telling him your requirements and financial conditions. Cross those lenders’ names from your list without delay who are not answering your calls day after day. Make sure that the lender is making you feel comfortable discussing with him.
The Bottom Line
Having a deep understanding of both the prevailing and the obsolete loan type will help you in choosing the right one. Mind it, pick a lender who is renowned among his customers for providing outstanding customer support. Your lender should guide you through every step of to help you fully in this entire complex process.
Do your homework properly before grabbing a mortgage type. Use the mortgage rate calculator tool to see whether it is going to create any financial burden on you in the near future or not.