Shopping for a Mortgage in 4 Easy Steps
Buying a home is the ultimate shopping experience, as there’s a level of excitement that only the search for your dream home can bring. You’ll most likely be making the largest single purchase of your life, so the process can be a bit scary. We’re here to put the emphasis on the “excitement” by walking you through four easy steps that will help you shop for the best mortgage.
Step 1: Pick Your Mortgage Product
No one can predict the future, but most homebuyers have a pretty good idea how long they’ll be living in their new home. If your job involves frequent transfers and relocations, or if you expect some bundles of joy to arrive soon and you’ll need a larger home to accommodate your growing family, an adjustable rate (ARM) might be your best bet. If you’re confident that you’ll be purchasing your forever home, or if you’re simply unsure what the future holds, go with the stability of a fixed rate.
Step 2: Partner with a Pro
Now you need to enlist the services of a knowledgeable and experienced mortgage professional. You’ll want to work with someone who is responsive and a clear communicator, so don’t be shy about interviewing several until you find a good fit. When you work with a responsible, experienced professional, it increases the likelihood that your mortgage experience will be smooth sailing.
Step 3: Know Your Fees
You’ll want to review your costs and fees on two documents: your Good Faith Estimate, which itemizes your closing costs and fees, and your Truth-in-Lending document, which shows the APR and outlines the terms of your proposed loan. The APR is simply your closing costs represented as a percentage, not the offering rate. These two disclosures provide the transparency you want in your homebuying process and ensure you’re not surprised by any hidden fees.
Step 4: Understand How Rates Move
Before you can effectively shop for mortgage rates, you must first understand how they are related to the bond market. That way you can confirm you’re getting the best deal based on the market’s movement.
Mortgage-backed securities are liquid bonds backed by mortgages. As a result, when mortgages are sold, bonds and rates move in opposite directions. If bond prices rise, mortgage rates fall, and vice versa. This movement in the bond market can happen once or twice daily.
Simply put, when mortgage loans are sold, rates move. If you’re still unclear how that affects your own rate, feel free to ask your mortgage professional for an explanation.
There you have it: easy as 1, 2, 3…and 4! Your path to home ownership just got a lot smoother, so get started today and settle into your dream home sooner rather than later!
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