If you are hoping to purchase a home by the end of this year, one of the top things you will need to do is work on getting preapproved for a loan. A loan to buy a house is called a mortgage and getting a mortgage is not always an easy and simple process. In fact, you might qualify for several different types of loans but feel uncertain as to how to choose the best one. If you are in this position, there are several different things to compare before getting a home loan.
The interest rate
One of the first things to look at with any loan program is the interest rate of the loan. The interest rate reflects the amount of interest you will pay the lender for the loan, and the lower the rate is, the less money you will pay. As you compare rates, you might notice that some are very close, such as 4.25% or 4.5%. If this is the case, you might think these are about the same and that there is really no difference with them. There is a big difference, though, between these rates, and you could see the difference if you looked at the amount of interest you would pay back after 30 years with both interest rates. This is often the best way to compare interest rates, simply because you can then see how much interest you would pay over the lifetime of the loan.
Secondly, you should compare the fees of the loans, including mortgage insurance if you need to pay it. For example, if you choose a conventional loan and have enough money to put down, there might be no mortgage insurance payment to make. With other loan types, such as VA or FHA loans, you might have to pay mortgage insurance and a funding fee upfront, no matter how much money you put down. Additionally, there are always fees involved with every loan type, so you should compare these too.
The down payment requirement
Finally, you should always compare the down payment requirement for all loan types you qualify for, as this could be the hindering factor in your decision. You might be able to get one type of loan with very little down, while another loan type might require more money down, and this is always an important factor to compare.
If you have questions about loans or want to know which type is the best for you, contact a mortgage lender to speak to a loan officer today.