Once you have a solid understanding of your home budget, you're ready to start exploring mortgage loan options.
You will want to reach out to a lender who will guide you through the mortgage process. They will help you understand different mortgage options based on term, type and rates.
Not all home loans are the same. Your monthly mortgage payment will consist of principal, interest and depending on the terms of your loan, escrow (including taxes and homeowner’s insurance), and private mortgage insurance. Here’s what you need to consider:
This is the length of time it will take you to repay your loan before you fully own your home. Your loan term will impact your interest rate, monthly payment and the total amount of interest you will pay over the life of the loan.
There are two basic types of mortgages: fixed or adjustable. Your choice will determine whether your interest rate and monthly payment will change over time.
Mortgage rates impact your monthly payment and the total cost of your loan. Typically, lower rates mean greater affordability because the accrued interest on the principal is lower.
Mortgage rates are currently remaining near all-time record lows, with the 30-year fixed-rate mortgage averaging 3.2% last quarter. Securing a mortgage at today’s low rates could make a home that was once unaffordable, affordable. In fact, National Mortgage News found that today’s homebuyers can afford 10% more home than they could have a year ago while keeping their monthly payment unchanged.
When considering a mortgage, you should talk to multiple lenders to find the best solution to fit your situation. Exploring mortgage options with multiple lenders could potentially save you thousands over the life of your loan depending on the term, type and interest rate. However, it’s important to remember that each time you apply for a loan, your credit is impacted.
A mortgage is a long–term commitment. In addition to a lender, consider talking to a HUD-certified housing counselor to discuss the best mortgage options to reach your long-term homeownership goals.
For more information on mortgages, visit My Home by Freddie Mac®.