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Comparing Mortgages

Choosing the right home mortgage loan is important. Securing a monthly payment that does not break the bank should be a top priority for any new homeowner. Still, the whole process can become confusing with so many options out there. The best way to obtain a favorable mortgage is doing your homework by comparing mortgages.

Check Your Credit

The most important rule of thumb when comparing mortgages is to determine your own financial situation before you apply for one. Take time to obtain a free report of your credit score. Your credit rating has a direct influence on your ability to qualify for a home loan. A bad credit score will make it nearly impossible to obtain one.

Work to reduce any outstanding debt. A lower debt-to-income ratio will make it easier to secure affordable interest rates on a new mortgage.

Examine Fees

Understanding options is important when filling out mortgage paperwork. Whatever you choose when it comes to loan terms, interest rates and fees will impact how much money you pay out over the life of the mortgage. When comparing mortgages, examine the Annual Percentage Rate (APR) and any additional fees contained in each one to determine which loan fits best within your immediate financial situation.

Understand Repayment Terms

Basic mortgages come with two choices for repayment terms: a 15-year loan or a 30-year loan. The length of the repayment term will determine how much money you pay for your house. Shorter-term loans usually require higher monthly payments. Longer-term loans cost more interest over the life of the loan.

Interest rates: Fixed vs Adjustable

Interest rates can be offered at a fixed rate or adjustable rate. A fixed rate means the interest rate remains unchanged over the life of the loan. An adjustable rate can start small, but it will increase over time as market forces dictate. Many lenders offer you an option to lock in a rate when you finalize the purchase your home. The only drawback is you will likely be charged additional fees to fix your interest rate at its current level.

Set aside a down payment. If you can pay about 10 percent of the home's cost up front, it will give you leverage to negotiate better terms on your mortgage rate.

Closing Costs

Closing costs should be factored into the final mortgage costs. These costs vary from one lender to another, but exceed $1000 on average. Sometimes you can negotiate with a seller to pay some or all of the closing costs. This scenario is not possible in all situations. If a seller declines to pay closing costs, set aside enough money so you can pay them yourself.

The best way to obtain a favorable mortgage is doing your homework by comparing mortgages