What You Need to Know Before Shopping for a Mortgage

Having your own custom home built is an incredibly exciting accomplishment. You can finally have a house that fits your needs and your lifestyle. Odds are that you’ll need a mortgage to pay for your new home. So what do you need to know to make sure you put yourself in the best possible position as the owner of a new home?

Getting the Best Rate

Lenders make money off of the interest they charge on the loans they offer. It’s the nature of the beast. That said, not all interest rates are created equal. Some are better than others, and not all lenders will offer the best rates. That’s part of why it’s so important to shop around when looking for a mortgage. Your credit score will also impact the interest rate that you get with your loan. By improving your credit score, you stand a better chance of getting a better interest rate on your mortgage.

Avoiding Red Flags

Just as not all interest rates are created equal, so too are all mortgages not created equal. Some are downright troublesome and full of red flags. Many predatory mortgage lenders enforce stiff prepayment penalties. Inconsistencies in the contract, last-minute changes, and things that just don’t quite add up should all be indicators that it’s better to move on to a different broker. The only way to pick up on these red flags is to ask the right questions and read the mortgage contract with painstaking care. It may be beneficial to have a third-party expert look over it if you need an extra pair of eyes.

The Impact of Your Down Payment

While the conventional wisdom is to have a 20% down payment on a home, it isn’t strictly necessary. There are ways you can buy a home with a smaller down payment. That does have an impact on your mortgage, though. The lower your down payment, the higher your monthly payments will be. You also may be required to carry mortgage insurance in addition to homeowners insurance. Think carefully about the impact your down payment will have on your financial situation before you finalize things.

Shopping for a mortgage is an important part of the home buying process. Before you get anything finalized, make sure you’re getting the best rate, you’ve avoided red flags, and you understand the impact your down payment will have. That will help you find the best mortgage you can so you can enjoy your home to the fullest.

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