Mortgage Comparison – What You Should Look For

If you’re a first time homebuyer, you may feel overwhelmed and possibly even intimidated by the prospect of finding a mortgage that’s right for you and your family. There are so many things to consider and the whole industry has a language of its own that may be difficult to understand when you’re not familiar with the terminology.

A mortgage broker can be helpful in guiding you through the process of finding and securing a mortgage, but if you’re looking to get started on your own, here are a few things to consider when doing a mortgage comparison. While each mortgage will have aspects and conditions that make it unique, there are some features that all mortgages share, and comparisons can be easily done.

1.      Cost of Financing – Every mortgage has financing costs associated with it. This typically translates into interest rates. There are fixed rate and adjustable rate mortgages. The way they work is much like you would imagine from their names. Fixed rate mortgages have an interest rate attached that remains the same throughout the life of the loan. Adjustable rate mortgages have interest rates that are generally lower, but hold with them the risk of rising in a matter of a few years.

2.      Terms – Terms refer to how long you want to take to pay back the mortgage. The standard length of a mortgage is 30 years, but you have the option of choosing a shorter term of 10, 15, or 20 years. It’s important to keep in mind that while you save on interest by choosing a shorter term, payments are higher, and are relative to the terms. In other words, a 20-year term would create payments higher than a 30-year term; 15 years would mean even higher payments, and a 10-year mortgage will save the most on interest, but will require the highest payments of all.

3.      Lenders – Conventional lenders can usually handle any type of mortgage loan, even those labeled unconventional, such as jumbo loans, for extremely expensive homes, and subprime loans, which are mortgage options available for those with less than stellar credit. You’ll want to explore all your options with several different lenders before settling on one. Collect rate quotes from a number of sources on one mortgage amount, and be sure to ask questions concerning closing costs. Savings on interest may not be as good as they seem if closing costs are exorbitant.

Once you’ve narrowed down your selection and have a lender in mind, ask for a bid. Only then will they begin looking at your credit history and give you actual numbers that will apply to your mortgage loan. Don’t feel compelled to accept their offer if you’re the least bit unhappy with it. There are many other lenders more than willing to do business with you if given the chance.

Deciding on a mortgage loan is a huge undertaking and you could be living with your decision for many years to come. Take your time, do proper research, and don’t sign anything until you find a mortgage loan you can feel good about.