The average rate on a 30-year fixed mortgage hit a record low of 3.29% this past week, the lowest rate for a 30-year fixed mortgage since Freddie Mac began tracking rates in 1971. This means it is a great time to buy! Here are some tips we hope you find useful when buying your first home.
Get Pre-Approved: This will help you determine how much you qualify to borrow and what you will be comfortable paying. While getting pre-approved is generally the first step in the buying process, it is important to protect you pre-approval. Read our article on How To Protect Your Pre-Approval.
Check Your Credit: Even if your score is less than perfect, you may still be able to qualify for a loan. Your loan officer can educate you on the many factors involved and make suggestions to help you maintain and improve your score prior to purchasing a home. We wrote an article recently on ways to improve your credit score that you can read here.
Determine Your Down Payment: The requirements for a down payment vary depending on the type of loan, the loan amount, and the available down payment assistance programs.
Save For Closing Costs: It is important to know that there are closing costs involved in buying a home. They may include costs such as title insurance, mortgage insurance, fire/flood/homeowners insurance, recording fees and loan origination fees, among others.
Explore Ways To Lower Your Rate: You may be able to pay points at the beginning of the loan to lower the interest rate charged. Points are the fees charged by the lender and one point equals 1% of the loan amount.
Decide Between A Fixed Or Adjustable Rate Loan: Depending on your short and long term goals, you may want to take advantage of a loan where the rate does not change or one where the rate adjusts periodically over time. A fixed rate loan is a loan where the interest rate does not fluctuate during the period of the loan allowing the borrower to accurately predict their future payments. An adjustable rate loan is a home loan with an interest rate that will adjust periodically and vary throughout the life of the loan.
Consider Conventional and Government Loans: While conventional loans offer fixed or adjustable interest rates, non-conventional loans should also be a consideration if you qualify. These loans (FHA, VA and USDA) typically involve a fixed rate and a low or no down payment if you qualify.
Take Advantage Of First-Time Home Buyer Programs: Ask your lender about options that are customized for those who have not owned a home before.
Factor In Mortgage Insurance: If you are putting down less than 20% of the cost of the home, you will most likely be required to have mortgage insurance.