How to Choose the Best Mortgage for Buying a Home

from Rosamin Franklin

Buying a home is not an easy thing to do. There are a lot of things you need to do before and after buying a home. Most of all you need to be financially responsible enough to deal with home buying aspects. You have to take out a home mortgage to buy a home. A home mortgage is a loan taken from a bank or lenders by keeping the house you are buying as collateral. This means if you default on the payment of your loan, your house will go for foreclosure. Thus you have to practice good financial habit to repay your mortgage on time. Also one of the most important aspects of home buying is choosing the right mortgage. Here are discussed steps that will help you choose the right home mortgage.

1. Shop for your mortgage – Since you are buying a mortgage for the first time, it is quite evident that you are not aware of the different rates and other information related to home mortgage. As a result, to get the best deal for yourself, you should shop around quite a bit. You need to get your mortgage pre-approved before you start to shop for a home. This will help you to choose a home that you can afford. If you hire a mortgage broker, he can look at several loan companies to find the best loan rates for you. However, you can even have options to save money from your local bank or credit unions. Searching at so many places will surely ensure you the correct mortgage.

2. Find out the loan types and options – You will be surprised at the home mortgage options that are available to you. The conditions that come with ARMs and PMI are enough to baffle you. The best option for you can be a fixed rate loan for fifteen or twenty years. Fixed rate mortgages (FRM) has the advantage of providing stability. Since you know the amount of payment you have to make every month it becomes easier for you to budget and save. You can also lock a low rate with the help of FRM.

3. Find out how much you can afford – Determining how much home you can really afford is one of the most important steps in home buying. As a rule of thumb you can calculate the cost of your home by keeping your mortgage with home insurance and home owner’s tax as 25% to 30% of your month’s gross income. According to some other experts you can keep your home cost to two and half times of your annual salary. If you spend too much on your mortgage you would be unable to meet your daily expenses.

You can make your home buying a lot easier and stress free process by choosing the correct mortgage.

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