may be the real estate agent’s lender. Typically, a good real estate agent or broker will have a list of lenders with whom they have relationships. No matter which type of lender you choose, “you should never take the first deal offered to you,” says Greene. “These days people are so anxious to buy a house because prices are fairly high, so they are delighted when they find a home they can afford, therefore, the finances are an after-thought. If one company will give you a mortgage, it’s likely another will.”
If a lender says: “we don’t care about your credit history,” or a “bankruptcy is no problem,” then think again. If you’re not selective with lenders, says Greene, you could find yourself in a “predatory lending situation, where lenders tell you whatever you want to hear. Then, when you arrive at the closing you find that you are moving into a loan that you hadn’t expected.” That’s why retaining a real estate attorney and asking lots of questions throughout the entire process is critical to obtaining the right loan.
Now that you have the information you need, take your time. It’s more important to buy when it is financially right for you. So, get out there and educate yourself, understand the terminology, talk to the right people and make an informed decision. Do the math and make sure you realize the true costs of home ownership. “The home buying process is such a monster move. When you actually buy and you’re responsible for a home, it’s a huge undertaking,” says Knight. “You’ve really got to take your time and don’t let anybody push you around or make you move faster than you’re ready.”
30-Year FIixed Rate
Benefits: Principal and interest payment remains constant throughout the life of the loan. Lender assumes risk of rising interest rates.
Disadvantages: May require that the borrower have more cash available for a down payment than with other types of loans. Higher overall interest than 15-year loans. May need to refinance if rates fall significantly.
Who should consider this type of mortgage: Good for buyers who want the security of a fixed principal and interest payment and who plan to stay in their home long term.
15-Year Fixed Rate
Benefits: Lower interest rate than 30-year fixed-rate mortgage. Principal and interest payment remains the same over the life of the loan. Lender assumes risk of rising interest rates. Equity builds more quickly than with a 30-year fixed-rate mortgage, and owners pay less interest over the life of the loan.
Disadvantages: Payments that are 25% to 30% higher can be a burden if income changes. May require that the borrower have more cash available for a down payment than with other types of loans. May need to refinance if rates fall significantly.
Who should consider this type of mortgage: Appeals to buyers who want the security of a fixed principal and interest payment, can afford higher payments, would like to pay off their mortgage quickly, and intend to stay in their home.
Hybrid Adjustable Rate