January 18 2024
Buying a home is no doubt an exciting and memorable experience. It also comes with a ton of emotion and key decision making too! The good news is that our team of mortgage experts and real estate professionals have a handful of tips to help you lock in a mortgage and find a home that you can feel confident about.
Tips for Finding the Right Mortgage
Know the difference between a fixed rate and a variable rate
Fixed-rate mortgages are a popular choice because they offer consistent interest rates and steady payments throughout your mortgage term. Let's say you have a 5-year fixed mortgage with an interest rate of 5.2% – that rate will stay the same for all five years, meaning your payments won't change either. This stability can be helpful for managing your budget and expenses. On the other hand, variable-rate mortgages have interest rates that fluctuate based on market conditions. While your payments remain constant, the amount of interest you pay off can increase or decrease. If you're open to a bit of risk and want the opportunity to save more money over the mortgage term, a variable-rate mortgage might be a good avenue for you to take. However, it's worth noting that variable rates come with lower penalties if you ever decide to break your mortgage early.
Remember your prepayment privileges
When buying a new home, the idea of quickly paying off your mortgage may not be top of mind. However, it's worth considering if you might want to do so in the future. By making extra monthly payments or lump sum payments each year, you can actually save a significant amount of money. But here's the catch: your mortgage needs to allow for these types of payments. If your goal is to pay off your mortgage as quickly as possible, it's important to understand your prepayment privileges. These privileges are outlined in your mortgage contract and specify how many additional payments you can make, how often you can make them, and how much you're allowed to pay off in advance. Knowing these details will help you determine if it's worthwhile to make prepayments.
Look out for costly prepayment penalties
After familiarizing yourself with your prepayment privileges, it's crucial to pay attention to the prepayment penalties specified in your mortgage contract. This is particularly important when comparing different lenders and mortgage options, as these penalties can sometimes reach tens of thousands of dollars. Keep in mind that larger banks often have higher penalties, while others may be more lenient. Having a clear understanding of the penalties associated with your mortgage will not only guide you in selecting the right option but also save you money in the long run. It will also prevent any unexpected shocks if you ever need to break your mortgage earlier than anticipated.
Don’t get so hung up on your rate
Your mortgage rate is certainly important, but it's not the only factor to consider. If you solely focus on rates when shopping for a mortgage, you might miss out on valuable features that could actually save you money. Some lenders might appear appealing with slightly lower rates, but these options could end up costing you more in the long run. While a lower rate may save you a few hundred dollars, the length of your mortgage and prepayment privileges have the potential to save you thousands. That's why it's crucial for buyers to recognize the importance of other mortgage features beyond just rates.
Explore your options and shop different lenders
In addition to the big banks, credit unions and monoline lenders are gaining popularity due to their competitive products, lower rates, and more lenient penalties. They also provide better chances of approval for borrowers. We always encourage buyers to explore various lenders because each one offers unique advantages. If you want a mortgage that aligns with your financial needs, it's important to have a good understanding of what the market has to offer.
Tips for Finding the Right Home
Set a clear and realistic budget
It's crucial to establish a realistic budget before diving into the homebuying process. Before you do anything, you’ll want to determine how much you can comfortably afford by considering your income, expenses, and long-term financial goals. You also want to account for additional costs like property taxes, insurance, and maintenance. By setting a budget upfront, you'll be better equipped to narrow down your search and avoid the temptation of stretching beyond your means. To give you a high-level view of your maximum mortgage and home affordability, use our affordability calculator.
Prioritize what you want and need in a home
Make a list of your must-have features and desired amenities in your home. This will give you a chance to differentiate between your essential, non-negotiable needs and those “not so important” preferences. Focus on factors like location, size, number of bedrooms and proximity to schools or amenities that are a must-have for you. This will help you stay focused during the search and make an informed decision based on your top priorities.
Work with a knowledgeable real estate agent
Partnering with a knowledgeable real estate agent is invaluable when navigating the homebuying process. An experienced agent can guide you through the market, help you find properties that meet your needs, negotiate on your behalf and provide expert insights to help you make an informed decision. At Homewise, our team of real agents takes the time to understand all of your wants and needs, along with your future financial goals to find you a home that you feel confident in. We also have a solid track record in the local market and the expertise to ensure a smoother, more successful buying experience for our clients.
Conduct a thorough home inspection
Once you find a potential home, it’s always wise to invest in a thorough home inspection. Hire a qualified inspector to assess the property's condition, including structural integrity, electrical systems, plumbing, and more. This step will help you uncover any hidden issues or necessary repairs that may impact your buying decision or negotiating power. With a detailed inspection report in hand, you’ll be more informed to decide whether the home is worth purchasing and can potentially negotiate repairs or price adjustments with the seller.
If you’re currently navigating the buying and mortgage process, the most important thing to do is ensure you know what’s involved before taking this next step. Having clarity and understanding the fine print will allow you to make a decision that is right for you – and at Homewise, we are here to help you along the way! Connect with us to speak with one of our dedicated mortgage advisors or real estate professionals to get started.
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