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You’ve been shopping around for weeks and you finally found your dream home.  Now What?

A person holding a miniature house and some dollar bills for making payments

Buying a home is a quintessential part of the American dream and most people will need to obtain a mortgage in order to pay for it.  When shopping for your new home, you carefully prepared your list of “must haves”, you sought the advice of a professional Realtor, you spent time visiting potential homes and home builders, you researched neighborhoods, you carefully weighed your options and then you made your choice.  One of the biggest in your life, right?  But what about your mortgage?  How much time did you spend preparing and shopping for one of the biggest loans in your life?

Finding the right mortgage loan is certainly as important as finding the right home but it’s not always as fun!  Still, you will be making payments on this loan for a number of years and finding the right one for you can save you thousands of dollars.  Getting the best mortgage rate involves more than comparison shopping.  It involves preparation, planning, and understanding your options among the many loan programs available.  Here are some tips as you prepare to embark on your home buying journey:

DO YOUR HOMEWORK

It’s important to understand the types of loans available to you.  Working with a mortgage professional can help get your questions answered and help you find the best loan product for your unique circumstances.  It’s also important to understand some of the terms and options available.   Borrowers can choose between government backed loans and conventional loans.  Government-backed mortgage programs provide guarantees to lenders which reduce their risk in the event a borrower defaults.  This can make it easier for borrowers to qualify for these types mortgages. Examples include FHA Loans, VA Loans and USDA Loans.  Conventional loans do not offer the same guarantees.  Borrowers work directly with private lenders and while their qualifications may be more strict, they may have lower interest rates.

KNOW YOUR CREDIT SCORE AND IMPROVE IF NEEDED

It’s best to make sure you are in a good position to qualify for a loan before you start shopping.  The best mortgage rates are awarded to best qualified borrowers.  A major part of your qualification is your credit score.  You can order a free copy of your credit score from each of the major credit bureaus at annualcreditreport.com.  Review the report for accuracy and if your score is not strong, take time and steps to improve it before shopping for your mortgage.  While you don’t have to rule yourself out of getting a loan due to a low score, you can get a better rate if you have time to increase it.

SHOP AROUND

There are many mortgage lenders to choose from and you can often compare them fairly easily online.  Key factors to compare when evaluating your mortgage lender options include 1) interest rate, 2) closing costs, 3) loan types and options, 4) customer reviews if available and 5) compatibility.  Comparing rates and closing costs is easy enough.  Find out what types of programs they offer such as FHA, VA, or USDA programs, fixed and variable interest rates, 15- 20- and 30-year terms to name a few.  Referrals from friends or Realtors can be very helpful and in the end, be sure you feel confident and comfortable with your loan officer as you will be working closely with this person for 30 – 60 days while your loan is underwritten.