When you decide to purchase a home with a mortgage loan, your first step will be getting approved for a loan. Mortgage loans come in all shapes and sizes, and you may have some decisions to make when getting yours. Here are four decisions your mortgage lender might ask you to make during this process.
1. The Length of the Loan
One of the questions a mortgage lender will ask you is how long you want for the length of your loan. The average length of a mortgage is 30 years, but people can choose shorter or longer periods. You may want to compare the payment amounts with different lengths of loans before choosing. You will pay more per month if you choose a 15-year mortgage compared to a 30-year loan, but you will also pay off the loan in half the time.
2. Whether You Want to Buy Points
The second decision you may have is whether you want to buy points. Buying points is a common event in the mortgage industry. When you buy points, you pay some money upfront to buy down your interest rate. Acquiring a lower interest rate provides a lower mortgage payment, and it helps you pay less in interest. You may want to compare the cost of the points to the amount you will save before making this decision.
3. The Amount of Your Down Payment
You might also have to decide how much money to use for your down payment. Your lender might require a specific amount of money for the down payment, so you must offer at least that amount. You should be cautious, though, when choosing your amount. If you use all the money you have for your down payment, you might not have any money to fall back on if you experience an unexpected bill.
4. How to Handle Closing Costs
Finally, you may have to decide how to handle your closing costs. Will you pay them out of your pocket at the mortgage closing, or do you want to roll them into your loan? This question is one that most lenders ask, and you must decide how you want to handle it.
Before you start looking for a mortgage, it might be helpful to research your options and the terminology used in the mortgage industry. Once you believe you are ready to apply, you can talk to a mortgage lending service.Share