How to Choose the Best Mortgage

mortgage
Moshe Farber
16, Nov 2021

Buying a house is part of the American dream, but turning this dream into reality is much more work than you might imagine. Unless you have the resources to purchase a property in cash, you will have to first do your research and procure the most favorable mortgage possible. 

If you are new to loans and mortgages, this article will give you a quick crash course of all the terms, tips, and factors you will need to keep in mind when structuring your mortgage agreement. 

What is a Mortgage? 

A mortgage is a loan that you take to buy a house or a property. As a borrower, you secure funds by offering your assets as collateral to your lender. Your assets act as a security if you cannot pay back your loan to the lender. 

A mortgage has two significant components that make up the final amount that is supposed to be paid by the borrower:

  1. The principal – This is the amount of money that is given to the borrower as a loan.
  2. The Interest – This is the additional amount that is calculated as a percentage of the principal amount. This percentage varies depending upon the mortgage structure and the lender. 

The payment for a mortgage is made in the form of monthly installments. The amount of these installments depend on the payment schedule and the interest rate added to the principal.

How to Look for the Best Mortgage

While a good mortgage structure can lower your stress levels, an unfavorable one can disrupt your financial plans. With thoughtful planning, you might be able to secure a mortgage that suits your needs and does not overburden you by adding to your financial stress. 

Below are some things you should consider when looking for the best mortgage possible. 

Do Not Overlook Upfront Costs

While you choose a mortgage, keep in mind that your expenditure is not limited to the upcoming monthly installments. You will have to make a down payment and spend on other processes included in the closing costs. Your lender will assess your financial security before sanctioning the loan. Remember closing fees can add up, and often include appraisal fees, title and insurance, legal fees, and broker fees. 

Depending on the size of your loan, your credit, and other factors, you might be able to obtain a seller’s concession in which the seller agrees to contribute to some of the closing costs, or you may be able to reach an agreement allowing for the closing fees to be rolled into the monthly mortgage payments at no extra cost. Therefore, always consult with your mortgage professional when evaluating your mortgage options to ensure you get the best possible arrangement. 

If you’re interested in speaking with a mortgage expert, reach out to us today! info@astarteam.com or 888-ASTAR-11 (888-278-2711)

Your down payment is also an opportunity to reduce the amount of your future mortgage payments. Even though you can customize the down payment to your financial position, it is often wise to make a reasonably large down payment. A sizable down payment might also help you reduce your interest rate on the loan. 

Know Your Financial Restrictions

A mortgage loan is a commitment that will stay with you for many years. It will have a significant impact on your lifestyle and financial decisions. It is therefore essential to assess your financial restrictions before you choose a mortgage. 

If you have a good or excellent credit score, you might be eligible to get lower interest rates and a favorable loan structure for your mortgage. Identify the amount you can afford to pay each month, and make sure to budget for repair and maintenance expenses, as well as homeowners insurance payments for your property.

Look for mortgages that will leave space for these additional costs and not undermine your personal and economic well-being. 

Understand Your Interest Rate

Considering the interest rate for your mortgage should be amongst your top priorities. Mortgage rates are not static. They keep changing every day. Some lenders allow you to either lock the interest rate on your loan or let it stay dynamic and adjust it once a year. 

When you modify your mortgage rate once a year, it is known as an Adjustable Rate Mortgage or ARM. Mortgages with a fixed rate are known as Fixed Rate Mortgages or FRM.  Keep in the mind that if you choose to go with an ARM, you should carefully read your mortgage agreement with the help of an attorney to determine how much your rates could increase. You should also know what market conditions will trigger an increase or decrease in your interest rate in the future.

Pay Attention to the Loan Duration

Mortgage duration can range from 5 to 15 or even 30 years. The longer the loan, the more interest you will be paying. 

You must assess your age, future goals, and financial situation and select a loan duration that corresponds to your values and future goals. Many lenders provide the borrower with the ability to customize their mortgage duration. 

Know Your Category

The loan market offers its services to a diverse set of individuals. While there are standard mortgage structures for common borrowers, there are some cases where specialized loans are sanctioned. Some of these special circumstances include:

  1. When a borrower has a military connection
  2. When a borrower wishes to reside in a rural or a suburban area
  3. When the borrower has a low credit score
  4. When the borrower is buying a house that is too expensive or too cheap compared to the lender’s loan guidelines
  5. When the borrower is a part of the police or other public sector service

Each category has its benefits or shortcomings depending upon the policies of the lender. You must know your category and look for a mortgage that allows you to make the best out of the available benefits. 

Getting a mortgage is a crucial decision that will directly impact your life and the lives of those connected to you. Therefore it is of utmost importance to conduct proper market research, compare your available options, and decide on a mortgage structure that suits your requirements. 

Seeking professional help from attorneys and brokers can often help you to find a suitable mortgage. When you make your judgment based on vigilant planning, you unlock a future that will not be dominated by the burden of your loan and will allow you to enjoy the pleasures of owning a house or property. 

Like any other long-term commitment, getting a loan to buy a property requires a lot of thinking and planning. It is wiser to invest the time in preventing a bad decision, rather than solving problems that come up later. 

We hope this article will steer you in the right direction when you are planning to purchase your next property. 

Are you interested in learning more about your mortgage options or how to get approved for a home loan?

Reach out to an Astar Mortgage Expert today! info@astarteam.com or 888-ASTAR-11 (888-278-2711) today! One of our loan officers will be glad to assist you. 

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