How to Choose a Mortgage
By Colin Ryan
Now that you’ve decided to buy a home, it’s time to consider how you’ll pay for it. Mortgages are extremely complicated, and selecting the wrong one could seriously jeopardize your future. Here are a few pointers for choosing your mortgage wisely.
Get to Know the Players
Ask a friend or relative who has recently gotten a mortgage if they would recommend their lender. Have your realtor or someone else who deals with mortgage lenders regularly (a financial adviser, attorney, etc.) help you create a list of lenders. Search the web and research these lenders extensively, being sure to push past the advertising and investigate fees, lock-in periods, and qualification requirements.
Used to be the emphasis when it came to mortgages was on paying them off as soon as possible. Today, the debt the average person will accumulate due to credit cards, student loans, etc. means it’s better to opt for the 30-year mortgage instead of the 15-year. This way, you have a lower monthly payment, with the option of paying an additional principal when money is good.
Take the Extra Point
When selecting a mortgage, you usually have the option of paying additional points (a portion of the interest that you pay at closing) in exchange for a lower interest rate. If you plan to stay in the house for a long time—and given the current real estate market, you should—taking the points will save you money and ease the burden you’ll bear down the road, when you’re investing in a family.
Draft a Pro
If researching mortgage lenders sounds overwhelming, you might consider hiring a mortgage broker to do it for you. A mortgage broker is an independent contractor who pairs you with lenders by scouring available loans to find the one that best fits your needs. As with your realtor, be sure to research your mortgage broker upfront and get everything in writing.
Published on July 2, 2013