Posted by Andrew Moran
Buying a home is one of the most stressful and confusing times in many peoples’ lives. When looking for a home, whether it is your first or fourth, there are many questions you need to ask yourself. One of the last things people seem to spend time considering is which type of home loan is the best fit for them. Obviously, when you are looking to buy a home, you spend your time visiting open houses, seeing which homes you like or don’t like, comparing school districts, etc. However, choosing the right type of home loan is one of the most important aspects of the home buying process.
There are many different types of home loans available to consumers, and they differ by the rates offered, terms, length, etc. Here are some simple steps to follow when choosing which type of home loan to take:
- First, you need to figure out how much money you can afford to pay on a monthly basis. This will give you an idea of how large of a loan you can afford to take out.
- Get preapproved for a mortgage
- Lock in your rates. If you think interest rates will rise, this will save you money in the long run
- Compare and contrast the different types of mortgages available to you
o 30 year fixed rate
o Option ARM
o Interest only
- Understand the terms of the loan before you commit to one
Following these basic steps will surely help any home buyer in the market. Simply signing a home loan with no knowledge of what the terms are, is a sure fire way to get yourself into financial turmoil.