Looking for a Mortgage? Better Find the Best Rate

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Is Now the Best Time to Buy?

Though we’re far from the housing bubble that burst in 2007, loan lenders are even more cautious than ever to lend mortgages to anyone with anything less than stellar credit history, but it’s still a great time to buy. Lower property prices coupled with lenders looking to regain a portion of the money they lost due to the many foreclosures make this the prime time to buyif you are in a decent position to do so, that is. If you have good FICO scores, and adequate financial resources, your mortgage rate can be very low.

Mortgage Types

The rate you get will depend on the type of mortgage you end up getting. Below are the mortgage types available and the terms of each one to help you make a more informed decision:

  • FixedThese mortgages have fixed interest rates that typically start out higher than other loans, but end up being lower than national rates in later years. The interest rate stays the same throughout the life of the loan.
  • AdjustableThe interest rate on these mortgages will start out lower to entice you into borrowing the money, but as the introductory period (typically seven years) ends, your rate will jump to whatever the current interest rate is. This type of mortgage works best for you if you don’t plan on holding a property for long, and can sell it before the rate adjusts.
  • FHAThis is a federal loan through the Federal Housing Administration, and is used for those who cannot qualify for a conventional mortgage. Interest rates will be a bit higher than conventional loans, but the lending restrictions will be somewhat more flexible.
  • VAIf you have served in the military at one point or another, you may qualify for a Veterans Affairs (VA) loan. Mortgage insurance is not required on these, but you may need to pay a small fee as a funding fee when borrowing the money.
  • USDAA USDA mortgage is typically used in rural areas by small farmers and low income people to gain property. Interest rates for these loans will match the market, but the benefit is that applicants may be able to qualify for 100 percent financing.
  • Interest OnlyInterest only loans allow you to pay just the interest payment for a specific period, such as 10 years. This will result in a smaller payment each month, along with a lower initial rate. However, they will adjust like adjustable rate loans and once the interest period is over, you will start paying the principal and the loan will amortize just like a regular loan.

Compare Closing Costs

Closing costs will vary with each loan lender, so do your homework carefully. Regardless of where you borrow the money from, there are three parts to closing costs – lender fees, third party costs, and mortgage taxes. While mortgage taxes should always be the same, regardless of lender, you should review them as closely as anything else. Anything that does not look right or will cost more in the long term, walk away from.

Get the Best Deal or Walk Away

You do not have to accept any loan offer and can walk away from any deal. If after comparing the closing costs along with the interest rates you do not see any mortgage rate that is the best, feel free to walk away from any deal and wait until you can get a better deal. If we learned one thing from the great housing bubble crash of 2007, it is that shoddy mortgages often end up biting the borrower in the end, resulting in foreclosure. Be sure to choose the loan lender who will give you the best mortgage rate before buying that property, or face getting burned in the long term.

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