Getting your first mortgage to buy a home can be an overwhelming process. If you're unfamiliar with the process, you may inadvertently make mistakes that can cost you over the life of the loan. Understanding the basics of dealing with the mortgage application process is the first step toward success. Here's a look at some of the things that you need to know so that you can get the best possible results from your home purchase process.
Lowest Rates Aren't Always The Best Option
It's easy to fall into the trap of shopping for the lowest possible interest rate. What you may not realize is that the lowest interest rate doesn't always become the most cost-effective solution. Sometimes that lower interest rate comes with extra points, the requirement to pay the closing costs, or both.
These things can add up quickly, leaving you paying more in the long run. Instead, consider taking the loan with a little bit higher interest rate if it means that you don't pay the closing costs or you pay fewer points. Remember to consider the big picture, not just the interest rate when you assess the total cost of the mortgage.
Higher Down Payments Often Reduce Your Interest
One thing that many people overlook is the effect that the down payment amount can have on the interest rate that you receive for your mortgage. Whenever possible, increase your down payment to help reduce that interest rate and subsequently lower your monthly payments and total mortgage cost.
Shopping Around Properly Won't Hurt Your Credit
You may be worried about multiple inquiries showing up on your credit report and hurting your score. If this sounds like you, there's good news that may help with your mortgage shopping experience. One of the policies around credit reporting is that multiple inquiries within a short period, such as a month in some cases, won't hurt your score individually but will instead be counted as a single inquiry. That way, you can shop around for the best option without damaging your score in the process.
These are some of the most important things to consider when it comes to securing a mortgage loan. Don't worry about the misconceptions out there. Instead, keep these tips in mind so that you are better armed to find the right mortgage solution for your situation. In fact, talk with a mortgage lending professional when you begin your journey to get some guidance along the way.