Financing a home doesn’t need to be an arduous and daunting task. You must know and understand what financing options are available to you. First, identify the agency that will help you with your home financing. You can elect to work with a Mortgage Broker, Mortgage Banker, Local Savings Bank or Credit Union in some cases. There is no right or wrong choice. It simply boils down to a few things. Service, expertise and price.
We often make the mistake of putting price first. I have seen it to often whereby the main factor is the lowest rate and not take any other factors into account. I encourage you to look for the best possible deal but not at the cost of getting involved in a bad situation. Often times you will receive recommendations from your Realtor or Attorney. These referrals have been some of the best choices a consumer can make. They are interested parties and want to see you obtain the financing of your new home. However, you must be diligent in comparing at least 3 different lending options. Talk to friends that have taken a mortgage recently, talk to your local banker, communicate with the referrals you received from you Realtor or Attorney. It is imperative you make an informed decision.
As you start to communicate with possible lending options, you should know what your own personal goals are. Is this a starter home? If so, is a 30 year fixed mortgage the right product. If you plan on being in a home for 3-5 years, maybe take a look at a possible 5/1 ARM (adjustable rate mortgage). This product will give you a fixed rate for 5 years and in most cases the rate will be lower than a 30 year fixed. The amortization is based on a 30 year loan and have an Interest Only option available to keep the payment down.
Additionally, most loans do not have a prepayment penalty. Take all things into consideration before prepaying your mortgage. I offer caution when making the decision to prepay your mortgage. Be sure all other facets of your financial health are not being ignored. Things like future College tuition, Life Insurance, IRAs, credit card debt etc. Have these items been addressed? Are you putting your money in the right place at the right time? Buying a home isn’t just that, it entails an entire host of things. You do not have to be rich to have a financial adviser. It will be worth it in the long run. Don’t be fooled in thinking you know, because unless your in the business of Financial Planning, you don’t. I don’t say that to be hurtful, but helpful.