Is This the Best Time to Buy?
Though we are far from the housing bubble that burst in 2007, with loan lenders more cautious than ever to sell mortgages to anyone with less than stellar credit history, this is indeed the best time to buy property. Lower property prices coupled with lenders looking to regain a portion of the money they lost due to the many foreclosures make this the prime time to buy—if you are in a decent position to do so, that is. If you have a decent FICO score and have adequate financial resources, your mortgage rate can be extremely low.
The rate you get will depend on the type of mortgage you end up getting. Below are the mortgage types available and the terms of each one to help you make a more informed decision:
- Fixed—These mortgages have fixed interest rates that typically start out higher than other loans, but end up being lower than national rates in later years. The interest rate stays the same throughout the life of the loan.
- Adjustable—The interest rate on these mortgages will start out lower to entice you into borrowing the money, but as the introductory period (typically seven years) ends, your rate will jump to whatever the current interest rate is. This mortgage type works best if you do not plan on holding a property for long and can sell it before the rate adjusts.
- FHA—This is a federal loan through the Federal Housing Administration, and is used for those who cannot qualify for a conventional mortgage. Interest rates will be a bit higher than conventional loans, but the lending restrictions will be somewhat more flexible.
- VA—If you have served in the military at one point or another, you may qualify for a Veterans Affairs (VA) loan. Mortgage insurance is not required on these, but you may need to pay a small fee as a “funding fee” when borrowing the money.
- USDA—A USDA mortgage is typically used in rural areas by small farmers and low income people to gain property. Interest rates for these loans will match the market rates, but the benefit to these loans is that applicants may be able to qualify for 100 percent financing.
- Interest Only—Interest only loans allow you to pay just the interest payment for a specific period, such as 10 years. This will give you a smaller payment each month as well as a lower initial rate. But, these will adjust just like the adjustable rate loans, and once the interest only period is over, you will begin to pay on the principal and the loan will amortize like a regular loan.
Compare Closing Costs
Closing costs will vary with each loan lender, so do your homework carefully. No matter where you borrow your money from, there will be three main parts to the closing costs: lender fees, third party costs and mortgage taxes. While the mortgage taxes should be exactly the same no matter what lender you choose, you should make sure you review these as closely as the other parts. Anything that does not look right or will cost more in the long term, walk away from.
Get the Best Deal or Walk Away
You do not have to accept any loan offer and can walk away from any deal. If after comparing the closing costs – along with the interest rates – you do not see any mortgage rate that is the best, feel free to walk away from any deal and wait until you can get a better deal. If we learned one thing from the great housing bubble crash of 2007, it is that shoddy mortgages often end up biting the borrower in the end, resulting in foreclosure. Be sure to choose the loan lender who will give you the best mortgage rate before buying that property, or face getting burned in the long term.