Buying a house is often more complicated than most people expect; it’s not a matter of simply finding a house you like and giving the seller money for it. There are a number of different steps you have to take in order to make it officially yours.
One of the biggest, but extremely important, aspects of buying a house that people fail to pay enough attention to? The mortgage.
For those planning on getting a mortgage to help pay for a house, it’s important to understand exactly what it is and what you should look for. Yes, as with many other factors involved with buying a house, you have the power to choose what is best for you.
While many assume they know plenty about mortgages, major misconceptions can actually cause you to make major mistakes when trying to choose the right one for you.
“Many buyers-borrowers only focus on the upfront fees when shopping around for a mortgage,” said Franco D’Angelo, Mortgage Advisor at BMC/Keystone Home Mortgage. “It’s not uncommon for people to select a loan to save a few hundred dollars upfront and lose sight of the total cost over the life of the loan.”
D’Angelo also cautioned homebuyers to consider the interest rate as well as fees for a more complete picture. Lenders may offer discounted fees or a lender credit at settlement, but those discounts will usually be factored into a higher interest rate. If consumers aren’t careful, they will ultimately pay more in the end to take advantage of upfront savings.
Another common misconception first-time homebuyers have about mortgages is that they assume they won’t qualify for a loan or that they can’t afford one in the first place, so they don’t even bother checking.
“Talk to a mortgage professional to help determine how much you can afford and what your options are,” D’Angelo advised. “There are loan programs that could result in a monthly payment that’s the same or lower than what you’re paying in rent, with out-of-pocket expenses that could be little to none.” So why wouldn’t you own versus rent?
When you’re ready to take out a loan, there are a few other considerations according to D’Angelo:
Be cautious about Internet Lenders: Many often choose Internet mortgage lenders instead of local lenders because they see ads for lower rates. However, that could be a big mistake if they are not familiar with lending practices in your area or if you want them to attend your settlement.
“With local lenders, you can do business face-to-face and easily reach them if you have any questions,” said D’Angelo. “With an internet lender, you may have a hard time getting hold of someone if there’s a problem.”
Your bank is not the only lender: According to D’Angelo, many people naturally assume that their bank will provide them with the best mortgage. It’s a great place to start, but people should compare their depository bank to another bank or mortgage broker, and look at the overall package. "A mortgage broker will have access to a variety of different loan programs with competitive rates and fees,” he said.
Educate Yourself: It’s important to take the time to research mortgages so you’re better prepared for when you’re ready to get one. Also, know what your needs are, how long you plan on staying in the house, and what your finances are. “A purchase should be based on needs and circumstances—not because you like a particular property,” said D’Angelo. “Instead of making an emotional decision, you should make an educated one.”
Check Your Credit: Keep an annual eye on your credit. If you’re thinking about getting a mortgage, look at your credit six months prior to deciding to purchase a property to make sure you’re in good shape. “If something needs to be repaired, you have time to do that so that you can get the lowest possible rate,” said D’Angelo.
If you have any questions, be sure to reach out to a mortgage professional for advice.