You want to purchase a home. For most people that means getting a mortgage. This is not the time to let somebody else do the shopping for you. Here’s why: The terms you get can make a sizable difference in what you pay to borrow the same amount of money. On a $250,000 home, one-quarter of a point could mean an extra $12,000 or more paid in interest over the life of the loan.
- If you’re looking for a home right now, getting your finances in great shape may be tough. On the other hand, if you’re just thinking ahead, read closely.
- Just like any other high-dollar purchase, banks will fight for the business of qualified buyers. There are plenty of websites that will help you collect quotes from lenders.
- If your down payment is less than 20% you’re considered higher risk. PMI, or private mortgage insurance, lowers the risk for the lender but here’s the catch: You have to pay for it and that can add thousands of dollars to what it costs to carry the loan. Expect to pay 0.5% to 1% of the entire loan each year.
- Let’s say you get the most amazing mortgage deal. Congratulations, but move fast. The interest rate – and possibly other conditions – are locked in for a set amount of time. You have to close within the lock period or risk losing the deal. Don’t procrastinate.