There are so many options on mortgage loans that sometimes it is rather difficult to know which one best suits your needs. Knowing beforehand which loan terms and conditions to analyze will certainly help you uncover the benefits of each loan type and each loan offer. By comparing different loan quotes you will be able to find the proper mortgage terms for you. Following are some guidelines on how to choose the right mortgage loan conditions so you can select the home loan offer that best suits your needs and finances.
Carefully Choose The Interest Rate Type
Mortgage loans can have a variable rate or a fixed rate, there are also combined rates that have a fixed rate period of time and after that period has ended the rate varies on fixed intervals. Variable rate loans usually have lower interest rates than fixed rate loans because the lender can always increase the interest rate if there are market variations so as to compensate higher costs and thus avoid losing money. A fixed rate loan will imply higher rates because under market variations the lender has to keep the same rate and absorb any higher costs that market variations may imply.
Variable rate loans are perfect for those who want to save money on their monthly payments and can cope with increments on the installments in case market variations dictate interest rate changes. Fixed rates, on the other hand are more suitable for those with a more conservative nature that plan to keep the property for life or for long periods of time and thus need more certainty in their investment. In any case, the decision will depend on your finances and on your expectations.
Know The Fees And Costs Associated With The Loan
All lenders are obliged to provide you with a document containing all the information regarding every single fee and cost that is associated with the loan. Not only it will include the interest rate, insurances’ costs and any other fee or charge that you will actually have to pay but also any charges that may or may not be present depending on uncertain circumstances like prepayment penalty fees. Also, though the APR or annual percentage rate is an excellent tool for comparing loans and it includes all the costs you will be paying on your mortgage installments, the other costs that may or may not be present may modify the actual cost of the loan (especially if you choose to sell the property rather than keep it for life).
The amount of money you decide to include as a down payment will modify the resulting monthly payments on your loan by modifying the interest rate that you have to pay and eventually, if the down payment is big enough, it may exclude the need for Private Mortgage Insurance which will imply important savings each month by eliminating the need for paying this insurance premium.
Locking The Rate, Closing The Deal
Once you have decided which loan you like the most, you should lock the rate that you were offered. In order to do that you need to contact the lender and notify them of your decision on applying for the loan and request a written notice of the rate lock and the time period it will last. Then, proceed to provide the necessary documentation and wait till your mortgage loan is approved.