Across the country, demand for homes far exceeds current supply. Zillow recently discovered that the average time between listing a home for sale and signing a contract is now just six days. The average price of these homes rose to $ 350,000, a record high.
An important reason for such high activity in the housing market is the unprecedented low mortgage rates. For anyone considering buying a new home or even refinancing their current one, a quick glance at current rates can provide motivation to take action. However, what follows after this call is key.
You are more likely to reap the full benefits of the favorable mortgage market if you go to the right lender. To do this, be prepared to shop around and compare prices before ultimately closing a deal. This homework can save you thousands.
Know your limits before looking for a lender. Don’t get hung up on monthly mortgage costs that you can’t stand. Take a close look at your budget and determine the maximum monthly mortgage payment you can safely assume. It is generally not recommended to spend more than 30% of your income on housing. You will need to know the number that works best for you when it comes time to negotiate with the lender.
• Broker or lender? Lenders are usually financial institutions – like banks – that lend you money directly to buy a house. Whereas brokers act as intermediaries who compare loan options on your behalf. If you want to buy options without doing all the running, a broker might be a good option. Be sure to ask who is involved in the loan process because if a broker is included they may charge a service fee. Don’t let these additional costs surprise you.
• Understand that there are different loan options. Terms, interest rates, and loan types vary, so it is important to find out what works best for your situation. For example, shorter loans usually come with higher monthly payments, and the types of interest rates can be fixed or adjustable. Knowing all the options available will help you choose the right loan.
• Disagree. Get ready to close the deal. You do not need to accept the first loan offer given to you. Lenders are entitled to retain at least some of the difference between the lowest available price and any higher price you agree to pay. This gap leaves room for you to negotiate. See if they reduce or eliminate any costs or commissions associated with your loan, or take advantage of a competitor’s offer to close a better deal.
• Strive for transparency. BBB can help. Lenders and brokers should disclose any policies, guarantees, and procedures that you may encounter on your way to getting your mortgage. The easiest way to find out if they will do this is to contact a BBB accredited institution, and the quickest way to find out is to search on BBB.org.