Going through the mortgage process can be an intimidating, overwhelming experience, even for people who have done it before.
For newcomers, it can be especially difficult. It’s easy to understand why: you’re facing the prospect of entering into an agreement that puts you on the hook for huge amounts of money over a very long period of time.
Mortgage contracts are long, complicated and filled with minutiae. The entire process can be nerve-wracking and many borrowers find themselves anxious to simply get it over with. This mindset isn’t necessarily conducive to obtaining the best home loan.
The following set of three basic tips are worth keeping in mind when engaging in the home loan process.
Shop Around
Fight the impulse to take the first option available to you. While interest rates don’t appear to differ all that much, a few hundreds of a percentage point can mean the difference of thousands of dollars over the lifespan of a mortgage. Additionally, there are other significant differences to consider beyond the rate of interest. The terms of mortgages vary between lenders and within the variety of different products offered by the same lender. For instance, some options may contain greater payment scheduling flexibility than others. Take the time to investigate the differences between the various choices available.
Drill Down
Dip into the details of the mortgage contract and make sure that you understand all of the potential fees that you may have to pay and the various features of the product. The last thing you want is to find out about some hidden expense or penalty that you’re likely to incur after you’ve signed all the papers.
Establish Your Priorities
Look beyond the rate and the regular payment estimate and take the time to think about what’s most important to you in terms of the mortgage outline and features. For instance, if cost certainty is critical to you, you may want to go with a longer-term fixed rate loan, even at a higher rate of interest, rather than a variable home loan. If your goal is to fulfill the mortgage as quickly as possible, you may want to look into a loan with a shorter term of maturity and one that won’t bring penalties for early repayment. The point is to prioritize your goals and be sure to select the mortgage product that will best meet your needs and lifestyle.
Photo Credit: US Department of Agriculture
While we shopped around we still could have found a better deal if we weren’t in such a rush.Planning is so important. If we would have known that we would have been been able to save enough money to pay our mortgage off in 4 years like we have we would have done things differently. We certainly could have gotten a better rate and we likely wouldn’t have to pay the fee we have to pay now to break the mortgage.
We didn’t shop around for the home loan we have now, but we definitely plan on doing this with the next house!
I think the biggest mistake people make is that they rely on information fed to them by others, namely people who are going to profit from the transactions. Frankly, my mantra has always been self-education: everyone should do their own research and understand the process, transaction, and consequences. Knowing you are walking into a meeting and have most of the angles figured out is very empowering, and will always lead you to making good decisions.
We just refinanced and reduced the monthly payment by close to $100.