Did you know that mortgage approval rates hit an all-time high in 2021? More people than ever are making moves to buy their own homes. But do you know what to look out for?
We can help with our handy guide. Read on as we give our must-know considerations when choosing a home loan.
1. What Monthly Payments Can You Afford?
Your budget plays a huge part in the options for loans. Firstly, you need to weigh up not just your current budget, but your financial future. For example, if you have children going to college, are you still going to be able to pay the type of monthly payment you can now?
Generally, you have two options when taking out a loan. This is a 15-year tenure and a 30 year.
A 15-year loan is paid quicker and has less interest, but has higher payments. 30 years have lower payments, but you will end up paying more interest.
2. Fixed or Variable Rate?
Your next decision is to take a fixed or variable rate. A fixed-rate gives you the same amount of interest, locked in, for a given period of time. If interest rates go up, you benefit as you still pay the same rate.
A variable-rate means that the interest on loans for homes goes up and down. This depends on the financial climate at the time. You could end up paying more, or you may end up paying less.
3. Reversion Rate
A reversion rate only applies if you have taken a fixed-term loan. This is the rate that the loan reverts to once the fixed interest rate is over.
Unfortunately, many people fail to address this when looking at loan terms and conditions. Very often, lenders will offer a low fixed rate for a period then have a higher reversion rate. This means you could end up paying more on a deal that looks good at first glance.
4. How Good Is Your Credit Score?
Your credit score plays a huge part in finding loans for homes. It is not only the deciding factor regarding if you can get the loan or not. It also decides how favorable your terms will be.
Before applying, spend a few months improving your credit score. Pay off your cards and any outstanding debts.
5. Comparing Loan Fees
Finally, make sure you are comparing multiple offers from home loan providers. You may find they offer you a lot more than you realized. In this case, don’t overstretch your budget.
You should also take care to compare fees. Many lenders will give the appearance of a good deal but claim money back with fees and charges. Look here for more loans to compare.
Choosing a Home Loan
Now you know the criteria for choosing a home loan, start shopping. With a little preparation, you can get pre-approval. This means you will be all ready to make a move when your dream property comes calling.
If you enjoyed our article, then visit the rest of our blog. From financial advice to property searching, we can help find your dream home in the coming year!