Make sure you choose the right mortgage for you

The importance of choosing the right mortgage

In the market for a new home? If so, you are probably wondering about mortgages and how to find the cheapest one. Finding the right mortgage is actually one of the most important steps in the process of buying a home. If you choose the wrong mortgage, you could be out thousands of dollars unnecessarily. Or, in the worst case scenario, you could end up in foreclosure.

The first step to finding the right mortgage is to understand the different types of plans and rates out there. Here is a basic outline of the standard mortgages offered by banks and major lending agencies.

Fixed-Rate

This is the most basic mortgage, which carries monthly payments with the same interest rate that you and the lending agency have agreed upon over a period of time.

FHA Loans

This type of loan is one that is most appealing to first-time buyers because it is insured by the government. These mortgages tend to have lower down payments and do not take into account credit scores.

Interest-Only

These loans carry the option of paying only the monthly interest for a fixed period of time. This is also known as a subprime loan.

There are also hybrid mortgages, VA loans, and specialty variations available through different lending institutions. These all carry different rules and rates, but if you understand them then you stand a better chance of saving thousands of dollars through the right mortgage. Shop around to find the best mortgage rates today.

Protect Yourself from Predators

Recently, there has been a lot of media coverage of predatory lenders who have duped homeowners onto the path to foreclosure. You can protect yourself from these toxic financial products in the following ways:

  • Avoid any lender who feeds you the line that a poor credit score is not a problem.
  • Avoid any lender that gives your rates and payments that are completely different from other lenders. Use your Good Faith Estimate as a baseline.
  • Be wary of any mortgages that include fees and rates that are much higher than what you initially thought you would pay.
  • If you do not understand the terms of the mortgage, or if the terms sound more complicated that the others you have researched, look for another one.
  • Beware of the representative that sounds a bit too much like a used-car salesman. Anyone who is trying a bit too hard to push their product on you is probably not legit.

Your mortgage is a major part of your financial future. To save yourself thousands of dollars as well as long term financial health, make sure you do your homework to find the best mortgage for you.

About Karl

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2 Responses to The importance of choosing the right mortgage

  1. I’m sure there are good reasons for someone to take out an interest-only loan – I mean, don’t there have to be if lenders are still offering them? – but I struggle to think of even one…

    • Karl says:

      I think you’re generally right, that if you are buying a home and not a house for an investment flip, there is no good reason for an interest only loan. If you’re going to keep it for 6 months or a year and sell it, then the limited investment can make sense.

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