While I haven’t made an official announcement on my blog yet, my wife and I are in the process of buying a condo. If everything goes according to plan, we will be closing mid December. Buying a home has been quite the learning curve, and I am excited to share everything that I am learning in the coming weeks.
One of the most intimidating aspects of buying a home, especially for the first time, is finding a home loan or mortgage. Not only is it likely to be the largest amount of debt you will ever incur, but it is also very confusing. Below are five essential tips to follow when you are shopping for a home loan.
Get a Referral
I cannot stress enough how important referrals are when it comes to shopping for a mortgage. The first thing that I did when looking for a mortgage broker was to go online and look at reviews. Unfortunately, there are not a lot of reviews on lenders, so it’s difficult to know who to trust. I was later referred to my real estate attorney, who then referred three top-notch lenders. Within a matter of a few emails and phone calls, I had 3 different rates from different lenders.
Getting a referral not only makes it easier, but you know that you can trust them. I know it was a huge relief for us to have an insider who knew the best people to talk to, so that we could get competitive rates and work with people who would be fair.
Understand the Different Types
It’s one thing to go into the process of shopping for a loan and not really knowing what the application process is; it’s an entirely different thing to not understand the different types of loans. There’s a basic difference between fixed rates and adjustable rate mortgages. There’s an argument for both, but you should understand the difference and what you are looking for. I knew that I was looking for a 30 year fixed rate loan, but if I wanted to entertain other loan types, I would look into that as well. The types of loans also vary based on your needs. For example, NPBS offers a variety of home loan products that vary depending on whether you are buying, refinancing, etc.
The bottom line, know what is out there and what you need before shopping for a loan.
One of the most crucial parts when shopping for a mortgage is to compare costs. They aren’t always presented in the same way, so be sure to get a good faith estimate so that you know what all of your costs are. Make sure to include not only the rate, but also the closing costs. When I was shopping, I was talking with mortgage brokers some were quoting me lower rates, but had significantly higher closing costs. Calculate everything and don’t assume anything. Make sure to ask every question that you can think of so that you can understand it fully.
Buying a home and shopping for a mortgage may be overwhelming at first, but it does not have to paralyze you. Take it one step at a time and use your network of friends and family to help coach you along. You can do it!